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economic efficiency

Achieved when all firms equate input marginal revenue product and marginal cost (maximize profits)

net marginal revenue

Marginal revenue after all variable costs

Equation 7.10 must hold for profit maximization because its right-hand side is just another expression for marginal cost. Solving Equation 7.10 for PL results in

PL = MRq X MPl or, because MRQ X MPL is defined as the marginal revenue product of L,

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