Asked by Dejanece Thomas on Jun 02, 2024
Verified
Suppose the labor market and all output markets are perfectly competitive. When the labor market is in equilibrium, the wage rate will:
A) be less than the marginal revenue product of labor.
B) equal the marginal revenue product of labor.
C) be greater than the marginal revenue product of labor.
D) None of the above is necessarily correct.
Marginal Revenue Product
The additional revenue a firm generates by employing one more unit of input, typically labor.
Labor Market
A marketplace where labor services are bought (by employers) and sold (by workers), determining the allocation of labor resources and wages.
Equilibrium
A state in a market where the quantity supplied equals the quantity demanded, leading to a stable situation where there is no tendency for change.
- Calculate the marginal revenue product of labor.
Verified Answer
ZK
Zybrea KnightJun 03, 2024
Final Answer :
B
Explanation :
In a perfectly competitive labor market, the wage rate will be equal to the marginal revenue product of labor (MRP). This is because in a competitive market, firms are price takers and must hire workers at the going wage rate. If the wage rate is below the MRP, then firms will increase their demand for labor, driving up the wage rate. If the wage rate is above the MRP, then firms will reduce their demand for labor, causing the wage rate to fall. Therefore, in equilibrium, the wage rate will be equal to the MRP.
Learning Objectives
- Calculate the marginal revenue product of labor.