Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
MRPL is calculated as the product of marginal revenue and marginal cost of labor.
B
A higher MRPL suggests that hiring more workers may increase a firm's profitability.
C
MRPL can help firms decide how many employees to hire based on wage levels.
D
MRPL is irrelevant if the price of goods remains constant in the market.
E
If the MRPL is less than the wage rate, it may indicate that the firm should reduce its workforce.
Understanding the Answer
Let's break down why this is correct
Answer
The Marginal Revenue Product of Labor (MRPL) measures the additional revenue generated from hiring one more worker. It is calculated by taking the change in total revenue when an extra worker is added and dividing it by the change in the number of workers. For example, if a company makes $1,000 more by hiring one additional employee, the MRPL for that worker would be $1,000. Understanding MRPL helps businesses decide how many workers to hire; if the MRPL is higher than the wage paid, it makes sense to hire more workers. Therefore, statements about MRPL being a key factor in labor hiring decisions and reflecting the value of the last worker hired are true.
Detailed Explanation
All the options provided misunderstand how MRPL works. Other options are incorrect because This option confuses MRPL with cost concepts; This statement wrongly assumes that a higher MRPL always means more profit.
Key Concepts
Marginal Revenue Product of Labor
Labor Economics
Profit Maximization
Topic
Calculating Marginal Revenue Product
Difficulty
easy level question
Cognitive Level
understand
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