If a firm is operating in a competitive labor market, the _____ of labor equals the MRP of labor because _____.

Question

Quizplus · Accepted Answer

In a competitive labor market, the value of the marginal product (VMP) of labor equals the marginal revenue product (MRP) because the price of the product (P) is equal to the marginal revenue (MR). This is because firms in competitive markets are price takers, meaning they sell their products at the market price, which equals the additional revenue from selling one more unit of the product.

If a Firm Is Operating in a Competitive Labor Market