## Ax Aq

Marginal revenue product is the economic value of a marginal unit of an input factor.6 For example, if the addition of one more worker generates two incremental units of a product that can be

6 The economic value of a marginal unit of an input factor is sometimes referred to as its value of marginal product (VMP), where VMPX = MPX X Pq. In a perfectly competitive market, Pq = MRq and VMPX = MRPX.

sold for \$5 each, the marginal product of labor is 2, and its marginal revenue product is \$10 (= 2 X \$5). Table 7.4 illustrates marginal revenue product for a simple one-factor production system. The marginal revenue product values shown in column 4 assume that each unit of output can be sold for \$5. The marginal revenue product of the first unit of X employed equals the three units of output produced times the \$5 revenue received per unit, or MRPX=1 = \$15. The second unit of X adds four units of production so MRPX=2 = 4. For the second unit of input, MRPX=2 = \$20. Marginal revenue products for each additional unit of X are all determined in this manner.