If a firm is able to charge a higher price for its output, all else equal, the value of the marginal product of labor will decrease to offset the higher price.

Question

Quizplus · Accepted Answer

The value of the marginal product of labor (VMPL) is calculated as the marginal product of labor (MPL) times the price of output. If a firm can charge a higher price for its output, all else equal, the VMPL will increase, not decrease, because the price component of the VMPL calculation has increased.

If a Firm Is Able to Charge a Higher Price