Question

Suppose that the MRP0 curve in Figure 28-2 is drawn under the assumption the product price is \(5 per unit. Which alternative MRP curve MRP1 or MRP2 -applies if the market clearing product price drops to \)3 per unit? Why?

Short answer

The curve$MR{P}_1$ applies if the market clearing product price drops

Step-by-step solution

Given Information

The marginal product of information, say work, is characterized as the additional result that outcomes from adding one unit of the contribution to the current blend of useful elements.

Explanation

Calculating the marginal revenue,

$\begin{array}{rl}& MRP=MR\times MP\\ & MRP=P\times MP\end{array}$

Change in the marginal revenue product

$\begin{array}{rl}& \mathrm{\Delta }MRP=\mathrm{\Delta }P\times MP\\ & \mathrm{\Delta }MRP=-\mathrm{\$}2\times MP\end{array}$

Hence the curve$MR{P}_1$ applies if the market clearing product price drops.