The Acme Company is a perfect competitor in its input markets and its output market. Its average product of labor is 30, the marginal product of labor is 20, the price of labor is $20, and the price of the output is $5. For Acme Company, the marginal revenue product of labor:
A) is $100.
B) is $150.
C) is $400.
D) is $600.
E) cannot be determined with the information provided.

Question

Quizplus · Accepted Answer

The marginal revenue product of labor (MRP) is calculated by multiplying the marginal product of labor (MPL) by the price of the output. Here, MPL is 20 and the price of the output is $5, so MRP = 20 * 5 = $100.

The Acme Company Is a Perfect Competitor in Its Input