Asked by Joseph Hernandez on Jun 09, 2024
Verified
Why is the marginal revenue product schedule a demand schedule for the individual firm in a purely competitive resource market and a selling output in a purely competitive product market?
Marginal Revenue Product
The increased earnings resulting from the application of an extra unit of a resource, such as capital or labor.
Demand Schedule
A diagram indicating the volume of goods or services that purchasers intend and can afford to buy across a range of prices.
Purely Competitive Market
A market structure characterized by many buyers and sellers, free entry and exit, and a product that is identical across suppliers.
- Comprehend the criteria for achieving maximum profitability in enterprises based on their consumption of inputs.
- Clarify the principle of derived demand as it pertains to the realm of resource markets.
Verified Answer
EP
Elexius PettigrewJun 11, 2024
Final Answer :
The MRP schedule constitutes the firm's demand for labor because each point on this schedule (or curve)indicates the number of workers the firm would hire at each possible wage rate. Under pure competition, product price is constant; therefore, the downward slope of the D = MRP curve is due solely to the decline in the resource's marginal product (i.e., law of diminishing returns).
Learning Objectives
- Comprehend the criteria for achieving maximum profitability in enterprises based on their consumption of inputs.
- Clarify the principle of derived demand as it pertains to the realm of resource markets.