Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The additional worker will increase profit if MRP exceeds wage cost.
B
The additional worker is unnecessary as MRP equals wage cost.
C
The additional worker should not be hired because total output is sufficient.
D
The additional worker will decrease overall revenue.
Understanding the Answer
Let's break down why this is correct
Answer
This situation fits best in the category of hiring decisions based on the Marginal Revenue Product (MRP). The Marginal Revenue Product is calculated by multiplying the additional output produced by a worker by the revenue generated from each unit sold. In this case, hiring an extra worker increases output by 10 units, and since each unit brings in $5, the total MRP from this worker is 10 units times $5, which equals $50. If the cost of hiring the worker is less than $50, it would be a good decision to hire them because the company would make a profit from their contribution. Therefore, the company should consider hiring the worker as it increases their overall revenue.
Detailed Explanation
The extra worker adds 10 units. Other options are incorrect because This suggests the extra worker doesn't help; This assumes that more output isn't needed.
Key Concepts
Marginal Revenue Product (MRP)
Hiring Decisions
Marginal Cost
Topic
Calculating Marginal Revenue Product
Difficulty
medium level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.