- CFA Exams
- CFA Exam: Level I 2021
- Study Session 4. Economics (1)
- Reading 12. Topics in Demand and Supply Analysis
- Subject 4. Marginal Returns and Productivity
CFA Practice Question
A condition for profit maximization in a labor market is that ______
B. marginal revenue equals the wage rate.
C. marginal revenue product equals marginal cost.
A. marginal revenue product equals the wage rate.
B. marginal revenue equals the wage rate.
C. marginal revenue product equals marginal cost.
Correct Answer: A
User Contributed Comments 5
| User | Comment |
|---|---|
| cahiz84 | Why is the last one wrong? |
| mordja | Because for Profit Maxization in a labor market to occur two conditions must be met : 1. MR = MC 2. MRP = Wage rate. Not Marginal revenue product = Marginal Cost. |
| Mavizo | Well explained , mordja.Thanks!!! |
| ascruggs92 | Also, MRP = MR x MP. Because MR=MC, it is also true that MRP = MC x MP. So unless MC is equal to 1, MRP cannot equal MC |
| 10425406 | if that holds for labor then what of capital? |