The figure given below represents equilibrium in the labor market with the demand and supply curves of labor.Figure 14.6
In the figure,
D = MRP implies demand for labor = Marginal Revenue Product
MFC represents Marginal Factor Cost curve
S represents the supply curve of labor

-Other things being equal, the marginal revenue product for labor hired by a firm that is a monopolist in the output market:
A)is represented by an upward sloping curve.
B)is equal to the marginal revenue product for labor hired by a perfectly competitive firm.
C)is less than the marginal revenue product for labor hired by a perfectly competitive firm.
D)is greater than the marginal revenue product for labor hired by a perfectly competitive firm.
E)is equal to the value of marginal product of labor.

Question

The figure given below represents equilibrium in the labor market with the demand and supply curves of labor.Figure 14.6
In the figure,
D = MRP implies demand for labor = Marginal Revenue Product
MFC represents Marginal Factor Cost curve
S represents the supply curve of labor
 
-Other things being equal, the marginal revenue product for labor hired by a firm that is a monopolist in the output market:
A)is represented by an upward sloping curve. 
B)is equal to the marginal revenue product for labor hired by a perfectly competitive firm. 
C)is less than the marginal revenue product for labor hired by a perfectly competitive firm. 
D)is greater than the marginal revenue product for labor hired by a perfectly competitive firm. 
E)is equal to the value of marginal product of labor.

Quizplus · Accepted Answer

The marginal revenue product for labor hired by a monopolist is less than that for a perfectly competitive firm because the monopolist faces a downward-sloping demand curve for its product, which means that to sell additional output produced by extra labor, it must lower the price of its product. This reduces the additional revenue generated from hiring more labor compared to a perfectly competitive firm, which sells its output at a constant market price.

The Figure Given Below Represents Equilibrium in the Labor Market