📚 Learning Guide
Marginal Product and Labor Costs
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If a firm like Pride Textiles decides to hire additional workers, resulting in a higher marginal product of labor, what is the primary reason for this increase in productivity?

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Choose the Best Answer

A

The firm is paying higher wages to attract more skilled workers.

B

The firm has achieved better organization of labor, leading to efficiency.

C

The market demand for the product has increased sharply.

D

The firm has more capital available for production.

Understanding the Answer

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Answer

When a firm like Pride Textiles hires additional workers, the primary reason for the increase in productivity, or the marginal product of labor, is that more workers can create more goods in a given time. Each new worker can contribute their skills, helping to produce items faster or in larger quantities. For example, if one worker can make 10 shirts in a day, two workers might be able to make 22 shirts, as they can help each other and share tasks. This teamwork often leads to better use of tools and machines, making the whole process more efficient. As a result, the firm can produce more products without significantly increasing costs, ultimately boosting profits.

Detailed Explanation

Better organization of labor means workers can work together more effectively. Other options are incorrect because Some might think higher wages attract skilled workers; People may believe that increased market demand alone boosts productivity.

Key Concepts

Marginal Product of Labor
Marginal Factor Cost
Perfectly Competitive Labor Market
Topic

Marginal Product and Labor Costs

Difficulty

medium level question

Cognitive Level

understand

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