Asked by DM KHAN BHUTTO on Jun 27, 2024
Verified
Profit maximization by firms ensures that the equilibrium wage always equals the value of the marginal product of capital.
Marginal Product
The marginal product is the additional output resulting from a one-unit increase in the use of a variable input, holding all other inputs constant.
Equilibrium Wage
The wage rate at which the quantity of labor demanded by employers equals the quantity of labor supplied by workers, leading to a balance without surplus or shortage.
- Gain insights into the effects of market environments and individual preferences on wages and capital income.
Verified Answer
MB
Maryam BoustanJun 29, 2024
Final Answer :
False
Explanation :
Profit maximization by firms ensures that the equilibrium wage equals the value of the marginal product of labor, not capital. The value of the marginal product of capital is related to the rental rate of capital in equilibrium.
Learning Objectives
- Gain insights into the effects of market environments and individual preferences on wages and capital income.