Identify the true statements about the value of the marginal product for a competitive firm below.

Question

Quizplus · Accepted Answer

All three statements are true. The value of marginal product (VMP) represents the additional revenue a firm earns from adding one more unit of labor. As more workers are hired, the marginal product of each additional worker will eventually decrease, leading to a diminishing VMP. The VMP also changes when the marginal product changes because the VMP is calculated by multiplying the marginal product by the market price of the output. Additionally, if the price of the output changes, the VMP will also change. Therefore, all three statements are true about the value of the marginal product for a competitive firm.

Identify the True Statements About the Value of the Marginal