Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Setting product prices
B
Evaluating output levels
C
Determining production efficiency
D
Analyzing labor wages
Understanding the Answer
Let's break down why this is correct
Answer
Marginal Revenue Product of Labor (MRPL) helps businesses decide how many workers to hire by showing how much extra money each worker can bring in. Similarly, Marginal Cost (MC) is used to determine the optimal level of production by indicating the cost of producing one more unit of a good or service. Just as a company wants to hire workers until the MRPL equals the wage paid to the last worker, it should produce more units until the MC equals the price at which they can sell the product. For example, if it costs $10 to produce one more toy, the company should only make that toy if it can sell it for more than $10. This balance ensures that the company operates efficiently and maximizes profits.
Detailed Explanation
Marginal Cost helps businesses decide how much to produce. Other options are incorrect because Some might think Marginal Cost is about setting prices; People may confuse production efficiency with Marginal Cost.
Key Concepts
Marginal Revenue Product of Labor
Marginal Cost
Optimal Hiring Decisions
Topic
Calculating Marginal Revenue Product
Difficulty
medium level question
Cognitive Level
understand
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