The figure given below represents equilibrium in the labor market with the demand and supply curves of labor.Figure 14.6
In the figure,
D = MRP implies demand for labor = Marginal Revenue Product
MFC represents Marginal Factor Cost curve
S represents the supply curve of labor

-The value of the marginal product is equal to the marginal revenue product under perfect competition in the product market because:
A)price is equal to average revenue.
B)price is equal to average cost.
C)marginal revenue is equal to marginal cost.
D)price is equal to marginal revenue.
E)average revenue is equal to average cost.

Question

The figure given below represents equilibrium in the labor market with the demand and supply curves of labor.Figure 14.6
In the figure,
D = MRP implies demand for labor = Marginal Revenue Product
MFC represents Marginal Factor Cost curve
S represents the supply curve of labor
 
-The value of the marginal product is equal to the marginal revenue product under perfect competition in the product market because:
A)price is equal to average revenue. 
B)price is equal to average cost. 
C)marginal revenue is equal to marginal cost. 
D)price is equal to marginal revenue. 
E)average revenue is equal to average cost.

Quizplus · Accepted Answer

Under perfect competition in the product market, the price is equal to the marginal revenue. In the labor market, the marginal revenue product represents the additional revenue generated by hiring one more unit of labor. Therefore, the value of the marginal product is equal to the marginal revenue product under perfect competition in the product market because the price is equal to the marginal revenue, which is the same as the value of the marginal product. Option D correctly states that price is equal to marginal revenue.

The Figure Given Below Represents Equilibrium in the Labor Market