The firm hires until MRP equals MRC
Accept an input unit while its added revenue covers its added cost. A small competitive restaurant faces a higher market wage while its MRP schedule is unchanged. Its profit-maximizing response is to raise employment until average product equals the wage keep employment fixed because the firm cannot change the wage reduce employment until MRP equals […]
Marginal revenue product combines productivity and output value
Use marginal revenue product = marginal product × marginal revenue. If a firm has product-market power, the value used in MRP_L=MP_L× MR is product price because price always equals marginal revenue marginal revenue rather than product price average total cost per unit of output the market wage paid to each worker total revenue earned from […]
