What do you mean by under conditions of perfect competition in the product market ........

What do you mean by under conditions of perfect competition in the product market?

MRP=VMP

MRP>VMP

VMP>MRP

None of the above

- Option 1: MRP = VMP

- In perfect competition, firms are price takers.

- The Marginal Revenue Product (MRP) equals the Value of the Marginal Product (VMP).

- This is because additional revenue from one more unit of input exactly equals the additional value it produces.

- This is the correct answer.

- Option 2: MRP > VMP

- This would imply the firm earns more from an additional unit than its value, unlikely in perfect competition.

- Firms would increase input use if MRP exceeded VMP until equilibrium is achieved.

- Option 3: VMP > MRP

- This means the value produced by an additional unit is greater than the revenue it brings in.

- Firms would reduce input use until balance is reached.

- Option 4: None of the above

- Incorrect as option 1 is correct under perfect competition.

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