Why is the value of marginal product equal to the marginal revenue product under perfect competition in the product market?
A)Because price is equal to average revenue
B)Because price is equal to average cost
C)Because marginal revenue is equal to marginal cost.
D)Because price is equal to marginal revenue
E)Because average revenue is equal to average cost

Question

Quizplus · Accepted Answer

In perfect competition, the firm is a price-taker, which means the price is determined by the market and the firm has to accept it. The marginal revenue of the firm is equal to the price of the product. Therefore, the value of the marginal product, which is the additional revenue generated by hiring an additional unit of input, is equal to the marginal revenue product, which is the additional revenue generated by selling an additional unit of output. Hence, the correct answer is D.

Why Is the Value of Marginal Product Equal to the Marginal