The demand for high-skilled workers is greater than the demand for low-skilled workers because
A. the MRP curve of high-skilled workers lies to the right of the MRP curve of low-skilled workers
B. high-skilled workers have a larger MP
C. high-skilled workers get paid more
D. Both answers A and B are correct
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D. Both answers A and B are correct.
The demand for high-skilled workers is greater than the demand for low-skilled workers because the marginal revenue product (MRP) curve of high-skilled workers lies to the right of the MRP curve of low-skilled workers, indicating that high-skilled workers contribute more value to the production process. Additionally, high-skilled workers typically have a larger marginal product (MP), meaning that each additional unit of high-skilled labor results in a greater increase in output compared to low-skilled labor.
To determine the answer to this question, we need to understand the concepts of marginal revenue product (MRP) and marginal product (MP) in relation to the demand for high-skilled and low-skilled workers.
The MRP curve represents the additional revenue generated by hiring an additional unit of a particular type of worker. It is influenced by the marginal product of that worker, which measures the additional output generated by employing an additional unit of that worker.
Option A states that the MRP curve for high-skilled workers lies to the right of the MRP curve for low-skilled workers. This means that the additional revenue generated by hiring high-skilled workers is greater than that generated by hiring low-skilled workers.
Option B states that high-skilled workers have a larger marginal product. Marginal product measures the additional output generated by an additional unit of a worker. If high-skilled workers have a larger marginal product, it means that they contribute more to the overall output of a firm compared to low-skilled workers.
Option C states that high-skilled workers get paid more. This is a result of the higher demand for high-skilled workers in the labor market because they have specialized skills and knowledge that are in limited supply. This higher demand for high-skilled workers leads to an increase in their wages.
From the explanations above, we can conclude that Option D, which states that both answers A and B are correct, is the correct answer. The demand for high-skilled workers is greater than the demand for low-skilled workers because the MRP curve of high-skilled workers lies to the right of the MRP curve of low-skilled workers, and high-skilled workers have a larger marginal product. Additionally, high-skilled workers get paid more due to the higher demand for their specialized skills.