
Wage determination under
Concept Introduction:
Marginal revenue product: The marginal revenue product (MRP) of a labour is equal to the revenue generated from the marginal product of the labour.

Explanation of Solution
Wage will be determined by the
The marginal revenue product (MRP) of a labour is equal to the revenue generated from the marginal product of the labor. It is the value of the product of marginal product of labor and the marginal revenue of the product. The point where MRP is equal to the wage rate will determine the amount of labour to be hired by the firm with the objective of profit maximization.
The marginal revenue product of labor is downward sloping
As more and more labor is employed, the marginal productivity starts declining as per the law of diminishing returns. This leads to fall in the marginal revenue product as well. This MRP curve also depicts the demand curve for labor.
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Chapter 28 Solutions
Economics Today: The Micro View (18th Edition)
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