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What will happen to the marginal revenue product (MRP), equilibrium wage rate, and employment level in the labor market for fishermen if there is a decrease in the price of fish?

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User Ikke
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1 Answer

3 votes

Final answer:

A decrease in the price of fish would result in a decrease in the marginal revenue product (MRP), equilibrium wage rate, and employment level in the labor market for fishermen.

Step-by-step explanation:

In the labor market for fishermen, a decrease in the price of fish would lead to a decrease in the marginal revenue product (MRP) of fishermen. The MRP represents the additional revenue generated by each additional unit of labor. When the price of fish decreases, the MRP decreases because fishermen are able to sell their catch for less money.

The equilibrium wage rate in the labor market for fishermen would also decrease. The equilibrium wage rate is determined by the intersection of the labor supply and labor demand curves. A decrease in the MRP would cause a decrease in the demand for labor, leading to a decrease in the equilibrium wage rate.

Lastly, the employment level in the labor market for fishermen would decrease. As the price of fish decreases and the MRP decreases, firms would be willing to hire fewer fishermen at the lower wage rate. This would lead to a decrease in the employment level in the labor market for fishermen.

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User Vav
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