This preview shows page 1. Sign up to view the full content.
Unformatted text preview: When the firm knows the level of demand for its output, it determines how much labor to demand by looking at the marginal revenue product of labor. The marginal revenue product of labor (or any input) is the additional revenue the firm earns by employing one more unit of labor. The marginal revenue product of labor is related to the marginal product of labor. In a perfectly competitive market, the firm's marginal revenue product of labor is the value of the marginal product of labor. For example, consider a perfectly competitive firm that uses labor as an input. The firm faces a market price of $10 for each unit of its output. The total product, marginal product, and marginal revenue product that the firm receives from hiring 1 to 5 workers are reported in Table 1 ....
View Full Document
- Fall '10