The profit-maximizing level of labor,in a union-dominated labor market,occurs where
A)Marginal wage = marginal factor cost.
B)Marginal wage = zero.
C)MRP = marginal wage.
D)MRP = marginal factor cost.

Question

Quizplus · Accepted Answer

In a union-dominated labor market, the union has the power to negotiate a higher wage rate for its members, which will exceed the market wage rate. Therefore, the firm will hire less labor, and the MRP (Marginal Revenue Product) of labor will be higher than the wage rate. The profit-maximizing level of labor is where MRP equals the marginal factor cost, which is the additional cost of hiring an extra worker. Thus, the answer is D, MRP = marginal factor cost.

The Profit-Maximizing Level of Labor,in a Union-Dominated Labor Market,occurs Where