The marginal revenue product of labor for a firm
A) will increase if the price of the firm's output increases.
B) is the firm's demand curve for labor.
C) will decrease if the firm hires more labor.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

The marginal revenue product of labor (MRPL) is the additional revenue a firm earns by employing one more unit of labor. It increases if the price of the firm's output increases because the value of the additional output produced by the labor is higher. The MRPL is indeed the firm's demand curve for labor, as it shows the amount of labor the firm is willing to hire at different wage rates, based on the additional revenue generated. Lastly, the MRPL typically decreases as more labor is hired due to the law of diminishing returns, where each additional unit of labor contributes less to output than the previous unit.

The Marginal Revenue Product of Labor for a Firm