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
jamb 2019english-language

The correct answer is B. super normal profit

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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