CFA Practice Question

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CFA Practice Question

A condition for profit maximization in a labor market is that ______

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?
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