Consider the following statements regarding the Marginal Revenue Product of Labour (MRPL): 1. It is the extra cost incurred for employing the last unit of labour. 2. It is calculated as the product of Marginal Revenue and Marginal Product of labour. 3. For a perfectly competitive firm, the Marginal Revenue Product of Labour is equal to the Value of Marginal Product of Labour. Which of the statements given above is/are correct?

The correct option is 2 and 3 only. Explanation The Marginal Revenue Product of Labour (MRPL) is a concept in production theory used to determine the optimal level of employment for a firm. It represents the additional revenue a firm generates by employing one additional unit of labour, holding all other inputs constant. Statement-wise Analysis - Statement 1 is Incorrect. The extra cost incurred for employing the last unit of labour is known as the Marginal Factor Cost (MFC) or Marginal Resource Cost. In contrast, MRPL refers to the revenue generated by that unit of labour, not the cost associated with hiring it. - Statement 2 is Correct. MRPL is derived by multiplying the Marginal Product of Labour (MPL)-the additional output produced by one extra worker-by the Marginal Revenue (MR)-the additional revenue generated from selling that extra output. Formula: MRPL = MPL × MR. - Statement 3 is Correct. The Value of Marginal Product of Labour (VMPL) is calculated as MPL × Price (P). In a perfectly competitive market, a firm is a price taker, meaning the price of the product is equal to its Marginal Revenue (P = MR). Consequently, for a perfectly competitive firm, MRPL (MPL × MR) is equal to VMPL (MPL × P). Key Takeaway: MRPL determines the demand for labour. A profit-maximizing firm employs labour up to the point where the Marginal Revenue Product of Labour equals the Marginal Wage/Factor Cost (MRPL = Wage).

Consider the following statements regarding the Marginal… - NCERT Class 12 Economics MCQ

NCERT Class 12 Economics — Chapter 2: Market Equilibrium

mcqhard

Consider the following statements regarding the Marginal Revenue Product of Labour (MRPL):

It is the extra cost incurred for employing the last unit of labour.
It is calculated as the product of Marginal Revenue and Marginal Product of labour.
For a perfectly competitive firm, the Marginal Revenue Product of Labour is equal to the Value of Marginal Product of Labour.

Which of the statements given above is/are correct?

NCERT textbook question

From NCERT Introductory Microeconomics · Page 75

Options

A1 and 2 only
B2 and 3 only
C1, 2 and 3
D2 only

Did you get this right?

Solution

The correct option is 2 and 3 only.

Explanation

The Marginal Revenue Product of Labour (MRPL) is a concept in production theory used to determine the optimal level of employment for a firm. It represents the additional revenue a firm generates by employing one additional unit of labour, holding all other inputs constant.

Statement-wise Analysis

Statement 1 is Incorrect.
The extra cost incurred for employing the last unit of labour is known as the Marginal Factor Cost (MFC) or Marginal Resource Cost. In contrast, MRPL refers to the revenue generated by that unit of labour, not the cost associated with hiring it.
Statement 2 is Correct.
MRPL is derived by multiplying the Marginal Product of Labour (MPL)-the additional output produced by one extra worker-by the Marginal Revenue (MR)-the additional revenue generated from selling that extra output.
Formula: MRPL = MPL × MR.
Statement 3 is Correct.
The Value of Marginal Product of Labour (VMPL) is calculated as MPL × Price (P). In a perfectly competitive market, a firm is a price taker, meaning the price of the product is equal to its Marginal Revenue (P = MR). Consequently, for a perfectly competitive firm, MRPL (MPL × MR) is equal to VMPL (MPL × P).

Key Takeaway: MRPL determines the demand for labour. A profit-maximizing firm employs labour up to the point where the Marginal Revenue Product of Labour equals the Marginal Wage/Factor Cost (MRPL = Wage).

Your note

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