Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The firm is experiencing diminishing returns to labor as more workers are added.
B
The market price of the goods produced has significantly increased.
C
The firm has successfully negotiated higher wages, which raises MRPL.
D
The efficiency of each worker has improved, leading to higher output.
Understanding the Answer
Let's break down why this is correct
Answer
When a firm sees that adding more workers is causing the Marginal Revenue Product of Labor (MRPL) to decrease, it usually means that there are diminishing returns to labor. This happens because each additional worker contributes less to the overall output than the previous one. For example, if a factory has a certain number of machines, adding more workers will help at first, but eventually, there may not be enough machines for everyone to work effectively. As a result, workers might get in each other's way or have to wait for machines, leading to less productivity. This decline in efficiency is why the MRPL falls as the workforce grows beyond a certain point.
Detailed Explanation
When a firm hires more workers, each new worker may add less value than the one before. Other options are incorrect because Some might think that higher prices for goods would always increase MRPL; It's easy to think that higher wages would mean workers are more productive.
Key Concepts
Marginal Revenue Product of Labor (MRPL)
Diminishing Returns to Labor
Labor Market Dynamics
Topic
Calculating Marginal Revenue Product
Difficulty
hard level question
Cognitive Level
understand
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