Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
MRP will decrease because of increased labor costs
B
MRP will remain unchanged as output levels are constant
C
MRP will increase because higher MPL leads to greater output
D
MRP will decrease because the price of the final product will fall
Understanding the Answer
Let's break down why this is correct
Answer
When a manufacturing firm provides better training to its workers, the Marginal Product of Labor (MPL) increases. This means that each additional worker can produce more goods than before. Since the firm operates in a competitive market, the Marginal Revenue Product of Labor (MRP) is calculated by multiplying the MPL by the price at which the goods are sold. Therefore, if the MPL increases, the MRP will also increase because the firm can generate more revenue from each additional worker. For example, if a worker previously produced 5 units of a product that sells for $10 each, the MRP would be $50; if training increases production to 7 units, the new MRP would be $70, showing how valuable the better-trained worker is to the firm.
Detailed Explanation
When workers are better trained, they produce more goods. Other options are incorrect because This answer suggests that higher labor costs will hurt MRP; This option assumes that output levels stay the same, but that's not true with better training.
Key Concepts
Marginal Product of Labor (MPL)
Factors of Production
Productivity Analysis.
Topic
Calculating Marginal Revenue Product
Difficulty
hard level question
Cognitive Level
understand
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