IIIusterate the relation between the value of marginal product of a factor under imperfeet competition
Answer (1)
20th Jun, 2021
Hello candidate,
There is an integral relation between the value of marginal states and product of a factor under imperfect conditions which states that the relevant concept for the factor price determination is the marginal revenue product (MPP x MR) of a factor, not the value of its marginal product (VMP).
Moreover, Under perfect competition AR is always equal to MR and thus, VMP of a factor is equal to its MRP. But under imperfect competition and monopoly MRP of factor is less than its VMP because MR<P.
Hope you found it informational!!
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