Let P be the output price for a particular good. Why is the value P*MP_L greater than MRP_L for a monopolist? A) The monopolist is not as technically efficient as firms operating under perfect competition. B) The monopolist hires less labor, so MP_L is higher under a monopoly than under perfect competition. C) The monopolist sets a price that is higher than MR. D) A and C are correct. E) B and C are correct.

Question

Quizplus · Accepted Answer

The value P*MPS (Marginal Product of Labor) is greater than MRP (Marginal Revenue Product) for a monopolist because the monopolist sets a price (P) that is higher than marginal revenue (MR), and due to hiring less labor, the marginal product of labor (MPS) is higher under monopoly than under perfect competition.

Let P Be the Output Price for a Particular Good