📚 Learning Guide
Demand and Supply in Labor Markets
hard

Order the following steps that a firm takes when considering changes in labor demand based on worker productivity and market conditions: A) Evaluate the marginal revenue product of labor, B) Analyze changes in worker productivity, C) Adjust hiring decisions accordingly, D) Determine the marginal product of labor.

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Learning Path

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Choose the Best Answer

A

B → D → A → C

B

D → A → B → C

C

A → C → D → B

D

B → A → C → D

Understanding the Answer

Let's break down why this is correct

Answer

When a firm thinks about changing how many workers to hire, it first needs to analyze changes in worker productivity. This means looking at how much more work each worker can do, which helps the firm understand the value of their labor. Next, the firm determines the marginal product of labor, which is the additional output from hiring one more worker. After that, the firm evaluates the marginal revenue product of labor, which considers how much money that extra output will bring in. Finally, based on all this information, the firm adjusts its hiring decisions to either hire more workers or reduce the number of employees, ensuring they match their needs in the market.

Detailed Explanation

First, a firm looks at how productive workers are. Other options are incorrect because This option suggests starting with the revenue product before checking productivity; This option skips analyzing productivity and jumps to hiring decisions.

Key Concepts

Marginal Product of Labor
Demand for Labor
Market Conditions
Topic

Demand and Supply in Labor Markets

Difficulty

hard level question

Cognitive Level

understand

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