When the MPP of labor is zero, ceteris paribus,
A) Employment can be increased only by offering a higher wage rate.
B) No further increases in output can be achieved by using additional units of labor.
C) MRP is at a maximum.
D) Additional units of labor must be employed because other factors of production are being wasted. Marginal physical product (MPP) is equal to the change in total output associated with one additional unit of input. If the MPP is zero, the last worker hired does not contribute any additional output.

Question

Quizplus · Accepted Answer

When the MPP of labor is zero, it means that no further increases in output can be achieved by using additional units of labor. Therefore, the answer is B. Options A and D are incorrect because they assume that increasing the wage rate and employing additional units of labor can increase output, which is not possible when the MPP is zero. Option C is also incorrect because MRP (marginal revenue product) is the additional revenue that a firm earns from hiring an additional unit of input, and it does not necessarily have to be at a maximum when the MPP is zero.

When the MPP of Labor Is Zero, Ceteris Paribus