Describe the equality of marginal revenue product and value marginal product.
Explanation of Solution
The marginal revenue product (MRP) shows the market value of the product, and the value marginal product (VMP) shows the firms’ revenue by adding an additional unit of labor. When MRP is equal to VMP, it implies that the market is a competitive one. In the case of a
Marginal revenue product (MRP): The marginal revenue product is the prevailing value of a marginal output in the market.
Here,
MRP = Marginal revenue product
MPP= Marginal physical product
MR= Marginal revenue
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- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning