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Marginal Analysis in Hiring
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Which of the following statements accurately reflect the principles of marginal analysis in hiring? Select all that apply.

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Choose the Best Answer

A

A firm should hire additional workers as long as the marginal revenue product exceeds the wage paid to the worker.

B

Hiring more workers will always lead to an increase in total output without any diminishing returns.

C

If the marginal product of an additional worker is less than the cost of hiring them, the firm should not hire that worker.

D

Marginal analysis considers both the additional output and the additional costs associated with hiring.

E

A company should only hire workers if they are guaranteed to generate profits immediately.

Understanding the Answer

Let's break down why this is correct

Answer

Marginal analysis in hiring involves looking at the additional benefits of hiring one more employee compared to the costs associated with that hire. It helps employers decide if bringing in a new worker will lead to more profit or efficiency than what it costs to pay them. For example, if a company finds that hiring an extra worker will increase production enough to cover their salary and bring in extra profit, it makes sense to hire them. On the other hand, if the cost of hiring exceeds the extra benefits gained, then it would not be a good decision. Therefore, employers should always weigh the extra output against the extra costs to make informed hiring choices.

Detailed Explanation

None of the statements accurately describe how marginal analysis works in hiring. Other options are incorrect because This suggests hiring is always good if extra revenue is higher than wages; This implies hiring more workers always increases output.

Key Concepts

Marginal Product and Hiring Decisions
Marginal Revenue Product
Diminishing Returns
Topic

Marginal Analysis in Hiring

Difficulty

easy level question

Cognitive Level

understand

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