Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The MRPL is $50, which is greater than the wage of $8, so the company should hire the worker.
B
The MRPL is $50, which is less than the wage of $8, so the company should not hire the worker.
C
Since the MRPL is equal to the wage, the company is indifferent to hiring the worker.
D
The company should hire the worker because the marginal product of labor is high, regardless of wage.
Understanding the Answer
Let's break down why this is correct
Answer
To decide whether to hire an additional worker, the company needs to compare the Marginal Revenue Product of Labor (MRPL) with the cost of hiring that worker. The MRPL is calculated by multiplying the marginal product of labor, which is 10 units, by the marginal revenue per unit, which is $5. This means the MRPL is 10 units times $5, giving us $50. Since this amount ($50) represents the additional revenue the company would earn from hiring one more worker, if the cost of hiring that worker is less than $50, it would be a good decision to hire them. In simple terms, as long as the extra money made from the new worker is greater than what it costs to hire them, it makes sense to bring them on board.
Detailed Explanation
The MRPL is calculated by multiplying the marginal product of labor (10 units) by the marginal revenue per unit ($5). Other options are incorrect because This option misunderstands the MRPL calculation; This option suggests that the MRPL is equal to the wage, which is incorrect.
Key Concepts
Marginal Revenue Product of Labor (MRPL)
Optimal hiring decisions
Marginal product of labor
Topic
Calculating Marginal Revenue Product
Difficulty
hard level question
Cognitive Level
understand
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