Question 3
[Maximum number: 20]
Evaluate whether the marginal revenue product theory (MRP) always explains the differences in wages.
Section C
Answer one question.
EITHER
CAIE A-Level Economics 8.3.4 Marginal Revenue Product Theory
Practise calculating marginal revenue product, deriving a firm's labour-demand curve and choosing employment where MRP equals marginal labour cost, then evaluating wage…
How this is tested
- calculate MRP as marginal physical product multiplied by marginal revenue
- hire labour up to the unit where MRP equals marginal cost of labour for profit maximisation
- shift MRP for productivity, output-price or product-demand changes and evaluate wage gaps