In a perfectly competitive market,
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Marginal Revenue Product of Labour (MRPL) is equal to Value of the Marginal Product of Labour (VMPL)
MRPL is marginal revenue times the marginal product of labour. VMPL is the price times the marginal product of labour. A perfectly competitive firm sells every unit at the market price, so its marginal revenue equals the price, and the two are equal.
MPL alone is extra output in units of the good. It becomes MRPL only after it is multiplied by marginal revenue.
NCERT (2026-27): “Wage Determination in Labour Market … Since we are dealing with a perfectly competitive firm, marginal revenue is equal to the price of the commoditya and hence marginal revenue product of labour in this case is equal to the value of marginal product of labour (VMPL). As long as the VMPL is greater than the wage rate, the firm will earn more profit by hiring one more unit of labour, and if at any level of labour employment VMPL is less than the wage rate, the firm can increase her profit by reducing a unit of labour employed.” |