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When the labor market is not perfectly competitive, labor will be hired up to the point where the _____ of labor equals the _____
When the labor market is not perfectly competitive, labor will be hired up to the point where the _____ of labor equals the _____.
A. marginal revenue product; marginal revenue
B. marginal product; market wage
C. marginal revenue product; marginal factor cost of labor
D. marginal product; marginal factor cost of labor
Expert Solution
The correct answer is Option C - marginal revenue product; marginal factor cost of labor .
- When the product market is not perfectly competitive, labor is hired to a point at which marginal revenue product is equal to marginal factor cost of labor.
- Marginal revenue production is the additional revenue generated by hiring one additional unit of labor.The marginal factor of labor is the cost incurred on hiring one more labor.
- As long as marginal revenue product is more than the marginal cost of labor, the firm will keep on hiring labor because additional labor generates more revenue than cost.
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