Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Increased profits due to higher productivity
B
No change in profits as hiring is optimal
C
Decreased profits as the cost of hiring exceeds the benefit
D
Improved employee morale leading to better overall performance
Understanding the Answer
Let's break down why this is correct
Answer
If Michelle's accounting company hires a worker whose marginal product is lower than the marginal revenue product, it means that the additional output the worker produces is not as valuable as what the company earns from that output. This situation can lead to inefficiency because the company is spending more on the worker than the worker generates in revenue. For example, if the worker can produce $50 worth of services but costs the company $70 to employ, the company loses money. Over time, this could hurt the company's profits and may lead to the decision to let the worker go or reduce hiring in the future. Therefore, it's important for the company to hire workers whose contributions align with their costs to maintain profitability.
Detailed Explanation
Hiring a worker whose marginal product is lower than the marginal revenue product means the cost of hiring is greater than the benefit. Other options are incorrect because Some might think higher productivity means more profits; It's a common belief that hiring is always good if it seems optimal.
Key Concepts
Marginal Product
Marginal Revenue Product
Profit Maximization
Topic
Marginal Analysis in Hiring
Difficulty
medium level question
Cognitive Level
understand
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