In a perfectly competitive market,

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Target Exam

CUET

Subject

Economics

Chapter

Micro Economics: Market Equilibrium

Question:

In a perfectly competitive market,

Options:

Marginal Revenue Product of Labor (MRPL) is equal to Value of the Marginal Product of Labor (VMPL)

Marginal Revenue Product of Labor (MRPL) is not equal to Value of the Marginal Product of Labor (VMPL)

Marginal Revenue Product of Labor (MRPL) is greater than Value of the Marginal Product of Labor (VMPL)

Marginal Revenue Product of Labor (MRPL) is leases than Value of the Marginal Product of Labor (VMPL)

Correct Answer:

Marginal Revenue Product of Labor (MRPL) is equal to Value of the Marginal Product of Labor (VMPL)

Explanation:

The correct answer is Option 1: Marginal Revenue Product of Labor (MRPL) is equal to Value of the Marginal Product of Labor (VMPL)

Marginal Revenue Product of Labor (MRPL) is the additional revenue a firm earns by hiring one more unit of labor.
Value of the Marginal Product of Labor (VMPL) is the marginal product of labor (MPL) multiplied by the price of the good produced by the labor.
In a perfectly competitive market, the firm is a price taker, meaning that it sells output at a constant market price.

Since:

$MRPL=MPL\timesMR$

$VMPL =MPL x P$

And in perfect competition, Marginal Revenue (MR) = Price (P), it follows that:

$MRPL=VMPL$

Thus, in a perfectly competitive market, MRPL is equal to VMPL.