A profit-maximizing firm will always set marginal revenue product equal to price (marginal cost) for every input. If marginal revenue product exceeds the cost of an input, profits could be increased by employing additional units. When the marginal cost of an input factor is greater than its marginal revenue product, profit would increase by reducing employment. Only when MRP = P is profit maximized. Optimal employment and economic efficiency is achieved in the overall economy when all firms employ resources so as to equate each input's marginal revenue product and marginal cost.
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