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JAMB Economics 2000 Question 35

Question 35

Labour Market

Firms continue to employ workers until the wage rate equals the

  1. A.average product of labour
  2. B.marginal revenue product of labour
  3. C.total product of labour
  4. D.sum of marginal revenue and average revenue of labour.
Show the answer and explanation

Answer: B (marginal revenue product of labour)

Explanation

An extra worker is worth hiring while the revenue from his extra output (MRP) exceeds his wage, so firms hire until wage = MRP.