Exhibit 11-12
-Exhibit 11-12 depicts a single firm hiring labor in a perfectly competitive labor market. Initially, the marginal revenue product of labor is represented by MRP₁ and the firm operates at point D. Suppose there is an increase in the market price of the product produced by labor, which point depicts the likely impact on this firm in their hiring decision?

Question

Exhibit 11-12

-Exhibit 11-12 depicts a single firm hiring labor in a perfectly competitive labor market. Initially, the marginal revenue product of labor is represented by MRP₁ and the firm operates at point D. Suppose there is an increase in the market price of the product produced by labor, which point depicts the likely impact on this firm in their hiring decision?

Quizplus · Accepted Answer

An increase in the market price of the product produced by labor will increase the marginal revenue product of labor for the firm, shifting the MRPL curve upward. This will lead to an increased quantity of labor hired by the firm, moving them from point D to a higher point on the new MRPL curve. The only point that corresponds to a higher level of quantity demanded for labor is point E.

Exhibit 11-12 -Exhibit 11-12 Depicts a Single Firm Hiring Labor in a Labor