Assume that without workers, no yards are mowed. The marginal product of labor (or MPL) refers to a company’s increase in total production when one additional unit of labor is added (in most cases, one additional employee) and all other factors of production remain constant. As a member, you'll also get unlimited access to over 83,000 Sciences, Culinary Arts and Personal It is important to remember that all the other factors remain constant. How Long Does IT Take To Get a PhD in Philosophy? The value of the marginal product of labor is the marginal product of labor multiplied by. In this example, we are assuming here that the firm employing labour is operating in a perfectly competitive market so that each unit of output sold generates a revenue of $20. Marginal productivity theory of wage states that wage of labour equals VMP L (= MRP L).Employer will employ labour up to the point until market wage equals labour’s value of the marginal product (VMP) and marginal revenue product (MRP). This is an important concept to management because it measures the optimal amount of labor that should be used to maximize productivity and profits. c. the total number of units produced. 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