Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
A higher marginal product of labor decreases production costs.
B
A higher marginal product of labor leads to increased hiring until the marginal product equals the wage rate.
C
A higher marginal product of labor has no impact on production decisions.
D
A higher marginal product of labor results in lower output levels.
Understanding the Answer
Let's break down why this is correct
Answer
In a perfectly competitive market, the marginal product of labor refers to the additional output that a firm gets from hiring one more worker. This concept is important because it helps firms decide how many workers to employ. If hiring an extra worker increases production significantly, the firm may choose to hire more, as the benefits outweigh the costs. For example, if a bakery hires one more baker and produces an extra 20 loaves of bread, it can sell those loaves for a profit, making it worth the additional cost of the worker. However, if the extra worker only produces a few loaves, the firm might not hire them, as the cost would be higher than the benefit.
Detailed Explanation
When the marginal product of labor is high, it means each worker adds a lot to production. Other options are incorrect because Some might think that a higher marginal product lowers costs; It's a common mistake to think that the marginal product doesn't matter.
Key Concepts
Input-Output Relationship
Market Structures
Production Decisions.
Topic
Marginal Product Analysis
Difficulty
hard level question
Cognitive Level
understand
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