Answer to Question #76484 in Microeconomics for Ameer Vann

Question

Consider a perfectly competitve labour market with two groups of workers differing in number and marginal productivity (measured in extra revenue)

In group A there are 40 workers with a marginal productivity of 9

In group B there are 60 workers with a marginal productivity of 5

Before hiring, employers do not know which group workers belong to

What would be the market wage rate? Illustrate with appropriate diagrams

Answer 1

The marginal revenue productivity theory of wages is stating that wages are paid at a level equal to the marginal revenue product of labor, 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.
If in group A there are 40 workers with a marginal productivity of 9 and in group B there are 60 workers with a marginal productivity of 5 then the market wage rate will be equal to marginal revenue of 5 or 9 depending of which group will be chosen.