At the profit maximizing level of employment for a monopolist:
A)marginal revenue product equals the value of marginal product
B)marginal revenue product exceeds the value of marginal product
C)value of marginal product equals the marginal wage cost
D)marginal revenue product is less than the value of marginal product

Question

Quizplus · Accepted Answer

At the profit-maximizing level of employment for a monopolist, the marginal revenue product (MRP) is less than the value of the marginal product (VMP) because the monopolist faces a downward-sloping demand curve, which means that to sell additional units of output, the price must be lowered on all units sold, thus reducing the MRP below the VMP.

At the Profit Maximizing Level of Employment for a Monopolist