Which of the following is true of the marginal value product curve (MVP)and the marginal revenue product curve (MRP)for an output market monopolist?
A)The MVP and the MRP are upward sloping curves that are parallel to each other.
B)The MVP lies above the MRP and is downward-sloping.
C)The MRP and the MVP coincide and are parallel to the horizontal axis.
D)The MRP and the MVP intersect at the equilibrium wage rate.

Question

Quizplus · Accepted Answer

For a monopolist in the output market, the marginal revenue product (MRP) curve lies below the marginal value product (MVP) curve because the monopolist faces a downward-sloping demand curve for the output, which means that the marginal revenue (MR) earned from selling an additional unit of output is less than the price of that unit. Therefore, the monopolist must lower the price of output to sell more, which means that the value of the marginal product of labor (MPL) diminishes at higher levels of employment. This implies that the MVP curve slopes downward. Since the MRP is the product of MPL and MR, it also slopes downward but lies below the MVP curve. The intersection of the MRP and the labor supply curve determines the equilibrium level of employment and wage rate for the firm, which may be lower or higher than the competitive level depending on the degree of market power the firm has.

Which of the Following Is True of the Marginal Value