Chapter 69, Problem 7MCQ

To determine

The MRPL if a bike works expand the number of assembly lines in a particular bike factory.

Answer to Problem 7MCQ

From the available options, the correct option is downward-sloping.

Explanation of Solution

The change in the price of substitutes can influence the price of the output which in turn affects the MRPL curve. When there is a large change in the quantity of labor with a small change in wage, the curve shifts to the left. The firm continuously hires more labor until it reaches where MRPL is equal to the wage rate. Therefore, options: a, c, d, and e are incorrect.

But a firm can expand its lines in a particular department when it is in a perfectly competitive product. Here, the MRPL curve is downward sloping due to the decreasing returns to the labor. Therefore, the correct option is b (downward-sloping).

Economics Concept Introduction

Introduction: Marginal revenue is the earning or benefit which is obtained by using an additional unit of the product or factor of production.

The marginal revenue product of labor (MRPL) curve represents the demand for labor by specifying the relationship between the quantity of labor and the wage rate for a firm.