Where L represents labor and X represents output, MP_L x P_X is the value of labor's marginal product while the wage rate is the A) value of labor's marginal revenue. B) cost of a marginal unit of labor. C) marginal cost of a unit of output. D) marginal revenue of a unit of output.

Question

Quizplus · Accepted Answer

The value of labor's marginal product (MP_L x P_X) essentially represents the additional revenue generated from employing an additional unit of labor. The wage rate, in this context, is the cost of hiring that additional unit of labor, making it the cost of a marginal unit of labor.

Where L Represents Labor and X Represents Output, MPL X

Where L Represents Labor and X Represents Output, MP_L X