For a firm buying labour in a competitive product and labour market, the value of marginal product of labour is calculated as the marginal product of labour multiplied by the:
Correct answer: B. Market price of the firm's output
- A. Average wage paid to workers
- B. Market price of the firm's output
- C. Average product of labour
- D. Firm's total fixed cost
Explanation
The value of marginal product equals the extra physical output from one more worker multiplied by the output price. It measures the additional revenue that the worker generates for the firm.
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About Microeconomics
Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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