According to the marginal productivity theory of resource demand, the labor-demand schedule for a producer selling in a purely competitive market is
A) the same as the marginal resource cost schedule.
B) the same as the marginal productivity schedule.
C) the same as the marginal revenue product schedule.
D) independent of the value of the product being produced.

Question

Quizplus · Accepted Answer

According to the marginal productivity theory, a producer should continue to hire labor as long as the marginal revenue product (MRP) of labor exceeds the wage rate. Therefore, the labor-demand schedule for a purely competitive firm will be based on the MRP schedule, which is the additional revenue that each unit of labor adds to the total revenue of the firm. Hence, the correct answer is C, as the marginal revenue product schedule represents the demand for labor in a purely competitive market.

According to the Marginal Productivity Theory of Resource Demand, the Labor-Demand