Any profitmaximizing firm increases its output until its marginal cost equals its marginal
The firm will increase its use of any factor of production until the last unit of the
factor adds as much to revenue as it does to costs
Hiring an extra unit of the factor also leads to an increase in the firm’s output and
The increase in the firm’s revenue attributed to this extra unit of the factor is
called the factor’s marginal revenue product.
Marginal Revenue Product (MRP): The extra revenue that results from using one unit
more of a variable factor.
The factor’s marginal revenue product is its marginal product (MP)