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Chapter 26: Problem 15

If the price that a perfect competitor receives for her final product doubles, the firm's MRP schedule will (LO3) a) rise c) double at each price b) fall d) stay about the same

Short Answer

Expert verified
The correct answer is c) double at each price. This is because in a perfect competition scenario, if the price of the final product doubles, the revenue per unit that the firm receives also doubles. Since MRP is calculated as the product price times the marginal product of labor, a doubling in product price results in a doubling of the MRP at each quantity produced.

Step by step solution

01

Understand the Basics of MRP

Marginal Revenue Product (MRP) can be calculated as the product price times the marginal product of labor. In other words, it reflects the additional revenue a firm can gain by employing an extra unit of labor.
02

Deducing the Impact of Price Change on MRP

In a perfect competition market scenario, the price of the product is determined by the market (demand and supply) and not by the individual firm. So, if the price of the final product doubles, the revenue per unit of the final product that the firm receives also doubles. Since MRP is calculated as the product price times the marginal product of labor, a doubling in product price results in a doubling of the MRP.
03

Matching the Deduction with the Options

Given this analysis, it is clear that a doubling in product price leads to a doubling in MRP at each quantity produced. The correct choice is therefore: c) double at each price

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Most popular questions from this chapter

The most important influence on a firm's demand for a factor of production is ( LO4) a) the quantities of other resources b) the prices of other resources c) its productivity d) the demand for the final product

The added output for which one additional input of labor is responsible is its (LO3) a) marginal revenue product b) marginal physical product c) average revenue product d) average physical product

If the MRP of the last worker hired is lower than the wage rate, the firm has \((\mathrm{LO3})\) a) hired too many workers b) hired too few workers c) hired the right number of workers

Which statement is true? (LO1) a) Resources and final products are both measured by units of input. b) Resources and final products are both measured by units of output. c) Resources are measured by units of input, and final demand is measured by units of output. d) Resources are measured by units of output, and final products are measured by units of input.

If the wage rate is higher than the MRP of the last worker hired, ( \(\mathrm{OO} 3)\) a) the firm might be able to profitably hire at least one more worker b) the firm has already hired too many workers c) there is no way of knowing whether the firm has too few or too many workers
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