Figure: The Value of the Marginal Product Curve (Figure: The Value of the Marginal Product Curve) In the figure The Value of the Marginal Product Curve, if a technological advance makes labor more productive and everything else stays the same, then the profit-maximizing quantity of labor:
A)will increase.
B)will decrease.
C)will stay the same.
D)cannot be determined.

Question

Figure: The Value of the Marginal Product Curve    (Figure: The Value of the Marginal Product Curve) In the figure The Value of the Marginal Product Curve, if a technological advance makes labor more productive and everything else stays the same, then the profit-maximizing quantity of labor:
A)will increase. 
B)will decrease. 
C)will stay the same. 
D)cannot be determined.

Quizplus · Accepted Answer

A technological advance that increases labor productivity will shift the value of the marginal product curve upward. At the profit-maximizing quantity of labor, the wage rate will be equal to the value of the marginal product. Since the value of the marginal product has increased, the wage rate that maximizes profit will also increase. This means that the profit-maximizing quantity of labor will increase.

Figure: the Value of the Marginal Product Curve