The value of a firm's marginal product of labor $(V M P L)$ equals the marginal revenue product of labor $\left(M R P_{L}\right)$.

What kind of market does this firm sell its product in?

Choose 1 answer:
(A) a monopsony market
(B) a monopolistically competitive market
(C) a perfectly competitive market
(D) a monopoly market
(E) an oligopoly market

Question

The value of a firm's marginal product of labor $(V M P L)$ equals the marginal revenue product of labor $\left(M R P_{L}\right)$.

What kind of market does this firm sell its product in?

Choose 1 answer:
(A) a monopsony market
(B) a monopolistically competitive market
(C) a perfectly competitive market
(D) a monopoly market
(E) an oligopoly market

Accepted Answer

∻Solution∻ ‖ a ⋮ Equal VMPL and MRPL: In a perfectly competitive market, a firm's value of the marginal product of labor (VMPL) is equal to the marginal revenue product of labor (MRPL) because the firm is a price taker both in the product and labor markets. ‖ ∻Answer∻ ⚹ C. a perfectly competitive market ⚹ ∻Key Concept∻ ⚹ VMPL equals MRPL in a perfectly competitive market ⚹ ∻Explanation∻ ⚹ In a perfectly competitive market, firms have no power to set prices and thus take the market price as given. This leads to the equality of VMPL and MRPL, indicating that the firm is operating in a perfectly competitive market. ⚹◊What impact would a perfectly competitive market have on the firm's pricing strategy in this scenario?⍭ Generate me a similar question◊

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