If the market for labor is perfectly competitive, the profit maximizing level of labor occurs where: A) MRP_L

Question

If the market for labor is perfectly competitive, the profit maximizing level of labor occurs where: A) MRP_L < W (the wage). B) MRP_L = P (the output price). C) MRP_L just exceeds W. D) MRP_L = W. E) none of the above

Quizplus · Accepted Answer

In a perfectly competitive labor market, the marginal revenue product of labor (MRPL) is equal to the wage rate (W) because each worker is a price taker and the firm cannot influence the wage rate. Therefore, the profit maximizing level of labor occurs where MRPL = W, which is equivalent to choice D.

If the Market for Labor Is Perfectly Competitive, the Profit