Asked by eliza mason on Jun 09, 2024
Verified
A competitive firm's marginal revenue product of labor will fall as it employs more labor because the price of labor decreases as more of it is employed.
Marginal Revenue Product
The extra income created by using an additional unit of a production resource or input.
Price of Labor
The wages or compensation workers receive in exchange for their labor, determined by various factors including skill level, demand, and economic conditions.
- Understand the relationship between marginal revenue product (MRP), wage rate, and hiring decisions.
Verified Answer
EM
estrella maldonadoJun 11, 2024
Final Answer :
False
Explanation :
The marginal revenue product of labor falls as more labor is employed due to diminishing returns, not because the price of labor decreases.
Learning Objectives
- Understand the relationship between marginal revenue product (MRP), wage rate, and hiring decisions.