Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The firm will increase its demand for labor.
B
The firm will decrease its wage rates.
C
The firm will reduce its overall output.
D
The firm will stop hiring new workers.
Understanding the Answer
Let's break down why this is correct
Answer
When a firm sees an increase in the marginal product of labor, it means that each additional worker is producing more goods or services than before. This higher productivity makes hiring more workers more valuable to the firm because they can produce more and potentially earn more revenue. As a result, the firm is likely to increase its demand for labor, wanting to hire more workers to take advantage of this increased productivity. For example, if a factory finds that adding one more worker leads to producing 10 extra toys instead of just 5, it will be eager to hire more workers to boost production and profits. Overall, a rise in the marginal product of labor usually leads to a higher demand for labor in the firm.
Detailed Explanation
When the marginal product of labor goes up, it means each worker is producing more. Other options are incorrect because Some might think that higher productivity means lower wages; It's a common mistake to think that more productivity means less output.
Key Concepts
Demand for labor
Marginal product of labor
Wage structure
Topic
Demand and Supply in Labor Markets
Difficulty
easy level question
Cognitive Level
understand
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