In a competitive market for labour, the equilibrium wage always equals the value of the marginal product.

Question

Quizplus · Accepted Answer

In a competitive market for labour, firms will continue hiring workers until the value of the marginal product is equal to the wage being paid to the workers. This is the point of equilibrium where neither the firm nor the workers have any incentive to change their behaviour. Therefore, the equilibrium wage always equals the value of the marginal product.

In a Competitive Market for Labour, the Equilibrium Wage Always