If wage rate is less than the average revenue product, th...
If wage rate is less than the average revenue product, the firms would be earning_______
Loss
Super normal profit
Normal profit
Higher revenue
Correct answer is B
MRP = Marginal Revenue Product
ARP = Average Revenue Product
Therefore, if the wage rate is less than the ARP, the firm will make super normal profit. As a result, new forms will enter the industry and the demand for labour will increase which will push up the wage rate so as to be equal to the ARP.
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