The opportunity wage is often a better measure of executive pay than
A)MPP because executives do not have an MPP.
B)MRP because of the difficulty in quantifying executive output.
C)Derived demand because the elasticity of supply for an individual is greater than 1.0.
D)Opportunity costs of executive leisure.

Question

Quizplus · Accepted Answer

MRP (Marginal Revenue Product) is a measure of the additional revenue generated by an additional unit of labor. However, with executives, it is difficult to quantify their output in terms of revenue as they are responsible for strategic decision-making, which may take years to show its impact on the company's revenue. Therefore, opportunity wage, which is the pay executives could earn in other companies or industries, is a better measure of executive pay as it takes into account the executive's skills, experience, and the demand for those skills in the market.

The Opportunity Wage Is Often a Better Measure of Executive