Marginal revenue productivity theory of wages

The marginal revenue productivity theory of wages is a model of wage levels in which they set to match to the marginal revenue product of labor, M R P {\displaystyle MRP} (the value of the marginal product of labor), which is the increment to revenues caused by the increment to output produced by the last laborer employed. In a model, this is justified by an assumption that the firm is profit-maximizing and thus would employ labor only up to the point that marginal labor costs equal the marginal revenue generated for the firm.

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