Which of the following statements is true?
A) In terms of the real wage,a competitive firm's MP of labor is less than its labor demand.
B) In terms of the real wage,a competitive firm's MP of labor is greater than its labor demand.
C) In terms of the real wage,a competitive firm's MP of labor is equal to its labor demand.
D) In terms of the nominal wage,a monopolist's MRP of labor is equal to its labor demand.
E) In terms of the nominal wage,a monopolist's MRP of labor is greater than its labor demand.

Question

Quizplus · Accepted Answer

In a competitive labor market, a firm hires workers up to the point where the marginal product of labor (MP) equals the real wage (W/P). This is because in a competitive market, firms must pay the market wage for all workers, and they can hire as many workers as they want at that wage. Therefore, the MP of labor is equal to the labor demand. In other words, the firm will hire workers until the additional output produced by each additional worker (MP) is equal to the cost of hiring that worker (W/P). So, statement C is true.

Which of the Following Statements Is True