Question on: JAMB Economics - 2019
If wage rate is less than the average revenue product, the firms would be earning________
A
loss
B
super normal profit
C
normal profit
D
higher revenue
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Correct Option: 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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