Scenario 14.1
A worker in Firm A earns an income of $5,000 per month. He has been offered a job in Firm B where he will be paid a salary of $7,000 per month.
-If there is imperfect competition in the product market, the marginal revenue product of a factor will be greater than the value of its marginal product.

Question

Quizplus · Accepted Answer

In imperfect competition, the marginal revenue product (MRP) of a factor is actually less than the value of its marginal product (VMP) because the firm faces a downward-sloping demand curve, meaning it must lower prices to sell additional output.

Scenario 14.1 A Worker in Firm a Earns an Income of $5,000