In the DMP model,firms continue posting vacancies until the probability of matching with a worker is equal to
A) the ratio of the cost of posting a vacancy to the profits from a match.
B) the marginal product of labour.
C) the real wage rate.
D) the ratio of the profits from a match to the number of matches.
E) the unemployment rate.

Question

Quizplus · Accepted Answer

The DMP model states that firms post vacancies until the marginal cost of posting a vacancy equals the marginal benefit of filling a vacancy which is given as the ratio of the cost of posting a vacancy to the profits from a match. Therefore, when this probability is equal to this ratio, firms stop posting vacancies.

In the DMP Model,firms Continue Posting Vacancies Until the Probability