For a profit-maximizing firm that is a price taker in the output market and a wage taker in the
Labor market,which of the following will be true?
A)The marginal revenue product will be higher than the marginal value product.
B)The marginal cost of labor must be lesser than the price of output.
C)The marginal value product of labor will equal the wage rate.
D)The marginal revenue from an extra unit sold will be higher than price.

Question

Quizplus · Accepted Answer

For a profit-maximizing firm that is a price taker in the output market and a wage taker in the labor market, the firm will hire labor up to the point where the marginal value product of labor equals the wage rate. Therefore, C is true. A and D are not necessarily true for a price-taking firm, and B is not necessarily true as the firm could operate at a loss in the short run.

For a Profit-Maximizing Firm That Is a Price Taker in the Output