Match List-I with List-II for a firm hiring labour:
| List-I | List-II | ||
|---|---|---|---|
| (A) | Extra cost of hiring one more unit of labour | (I) | Marginal revenue |
| (B) | Extra output produced by one more unit of labour | (II) | Marginal revenue product of labour |
| (C) | Additional earning from selling each extra unit of output | (III) | Wage rate |
| (D) | Marginal revenue times marginal product of labour | (IV) | Marginal product of labour |
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A) - (III), (B) - (IV), (C) - (I), (D) - (II)
These four terms describe how a firm weighs the cost and the gain of one more unit of labour.
| List-I | List-II | Reason |
|---|---|---|
| (A) Extra cost of hiring one more unit of labour | (III) Wage rate | Each extra unit of labour costs the firm its wage. |
| (B) Extra output produced by one more unit of labour | (IV) Marginal product of labour | The extra output from one more unit of labour is its marginal product (MPL). |
| (C) Additional earning from selling each extra unit of output | (I) Marginal revenue | The extra earning from selling one more unit of output is marginal revenue (MR). |
| (D) Marginal revenue times marginal product of labour | (II) Marginal revenue product of labour | MR × MPL is the extra earning from one more unit of labour, the MRPL. |
NCERT (2026-27): “Wage Determination in Labour Market … The firm being a profit maximiser will always employ labour upto the point where the extra cost she incurs for employing the last unit of labour is equal to the additional benefit she earns from that unit. The extra cost of hiring one more unit of labour is the wage rate (w). The extra output produced by one more unit of labour is its marginal product (MPL) and by selling each extra unit of output, the additional earning of the firm is the marginal revenue (MR) she gets from that unit. Therefore, for each extra unit of labour, she gets an additional benefit equal to marginal revenue times marginal product which is called Marginal Revenue Product of Labour (MRPL). Thus, while hiring labour, the firm employs labour up to the point where w = MRPL and MRPL = MR × MPL” |