Use the following to answer questions :
Figure 13-3
-If the demand curve in Figure 13-3 shifts to D', the marginal revenue product has:
A)increased by $4 for every unit.
B)increased by $4 only at equilibrium.
C)decreased by $4 for every unit.
D)decreased by $4 only at equilibrium.
E)none of the above.

Question

Use the following to answer questions :
Figure 13-3 
-If the demand curve in Figure 13-3 shifts to D', the marginal revenue product has:
A)increased by $4 for every unit. 
B)increased by $4 only at equilibrium. 
C)decreased by $4 for every unit. 
D)decreased by $4 only at equilibrium. 
E)none of the above.

Quizplus · Accepted Answer

If the demand curve shifts to the right to D', it means the market price has increased. This, in turn, will increase the marginal product of labor, as more labor can now be employed profitably. As a result, the marginal revenue product will increase by the same amount as the increase in the market price, which is $4 per unit in this case. Therefore, the correct choice is A.

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