📚 Learning Guide
Marginal Analysis in Hiring
medium

If a firm finds that the marginal revenue product (MRP) of hiring an additional worker is greater than the wage paid to that worker, it should not hire that worker as the costs outweigh the benefits.

Master this concept with our detailed explanation and step-by-step learning approach

Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose the Best Answer

A

True

B

False

Understanding the Answer

Let's break down why this is correct

Answer

If a firm discovers that the marginal revenue product (MRP) of hiring one more worker is greater than the wage they would pay that worker, it actually means they should hire that worker. The MRP represents the additional revenue generated by that worker, while the wage is the cost of hiring them. For example, if a worker can bring in $100 in revenue but costs the firm $80 in wages, the firm gains an extra $20 in profit by hiring that worker. Therefore, when the MRP exceeds the wage, the benefits of hiring outweigh the costs, making it a smart decision for the firm. This concept is important because it helps businesses maximize their profits by making informed hiring choices.

Detailed Explanation

When the extra money made from hiring a worker is more than their pay, it makes sense to hire them. Other options are incorrect because This answer suggests that hiring is a bad idea when it can actually be good.

Key Concepts

Marginal Revenue Product (MRP)
Wage Determination
Profit Maximization
Topic

Marginal Analysis in Hiring

Difficulty

medium level question

Cognitive Level

understand

Ready to Master More Topics?

Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.