00:01
Hello, so both the marginal revenue product, so the mrp, the marginal revenue product, and then the value of the marginal revenue product, so the vmp, are going to be economic concepts used to measure the productivity of labor and the revenue generated by that labor.
00:17
However, they differ in the market conditions in which they are applied and the types of firms they are used to analyze.
00:24
So in a perfectly competitive labor market, where many firms compete for the same workers, the mrp and the vmp are essentially the same thing.
00:33
The mrp is the additional revenue earned by a firm when it hires an additional unit of labor, where the vmp is going to be the additional value produced by an additional unit of labor.
00:50
So this would be the additional value produced by an additional unit of labor.
00:59
So both the mrp and the vmp are equal to the marginal product of labor multiplied by the price of the output.
01:07
And in a perfectly competitive market, the price of the output is determined by the market, and all firms face the same price.
01:13
Therefore, the mrp and the vmp are equivalent and equal to the wage rate.
01:25
In a monopoly labor market, where a single firm controls the market, the mrp and vmp are not equivalent...