Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Hire more workers to increase revenue
B
Reduce the number of workers
C
Increase wages to attract more workers
D
Maintain the current number of workers regardless of MRPL
Understanding the Answer
Let's break down why this is correct
Answer
If a firm's Marginal Revenue Product of Labor (MRPL) is less than the wage it pays, this means that each additional worker is not generating enough revenue to cover their salary. In this situation, the firm should consider reducing the number of workers or finding ways to increase their productivity. For example, if a company pays a worker $15 an hour but that worker only brings in $10 worth of revenue, the firm is losing money. By either cutting back on staff or investing in training to improve skills, the firm can align costs with revenue more effectively. This helps ensure that every worker contributes positively to the company's finances.
Detailed Explanation
When the extra money made from hiring a worker is less than what you pay them, it's better to have fewer workers. Other options are incorrect because Some might think hiring more workers will boost revenue; Increasing wages might seem like a way to attract workers.
Key Concepts
Marginal Revenue Product of Labor (MRPL)
Labor costs and hiring decisions
Competitive market dynamics
Topic
Labor Productivity and Decision-Making
Difficulty
medium level question
Cognitive Level
understand
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