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Diminishing Marginal Returns tells us that as a firm hires more systems of a resource, the marginal product of those sources ultimately diminishes.

Marginal Product per Dollar is a calculation of a marginal product to cost ratio for a firm’s hiring of a secondary unit of a resource. The formula is marginal product divided by price of the resource (MP/P). So if the last worker hired has a marginal product of 15 and also that worker prices $5, the marginal product per dollar is 3.

Marginal Revenue Product per Dollar is a calculation of the marginal revenue product to cost proportion for a firm’s hiring of a secondary unit of a resource. The formula is marginal revenue product split by price of the reresource (MRP/P). Using the example above, if each unit sells for $10 then the last worker has actually a marginal revenue product of $150 (15x$10). That suggests the marginal revenue product per dollar of the last worker hired is $30 ($150/$5)

Least Cost Combination occurs when a firm adjusts their employment of sources to minimize prices. The leastern expense combination is discovered where the marginal product per dollar for all the sources a firm employs are equal (MPL/PL=MPN/PN=MPC/PC). If the ratios are not equal, a firm would reduce price by employing more of the reresource through a greater MP/P and less of the resource through a reduced MP/P.


Profit Maximizing Combination is exactly the exact same as leastern price, other than that marginal revenue product per dollar is offered rather of marginal product per dollar. So the formula profit maximizing combicountry is (MRPL/PL=MRPN/PN=MRPC/PC).​Note: These reresource combinations are exceptionally comparable to energy maximization for consumers through combinations of items and also solutions. 

Multiple Choice Connections:2012 Released AP Microeconomics Exam Questions: 432008 Released AP Microeconomics Exam Questions: 12

Up Next: Recheck out Game: Product and Resource CombinationsContent Review Page: Externalities

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Here is a short testimonial of leastern cost combinations of sources and also profit maximizing combinations of sources. Hopecompletely I will certainly have the ability to make one more testimonial game prior to the end of the year around this and utility maximization. Wish me luck!