Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Profit increases by $50
B
Profit decreases by $50
C
Profit remains unchanged
D
Profit cannot be determined without more information
Understanding the Answer
Let's break down why this is correct
Answer
When a firm hires an additional worker, it looks at how much extra money that worker can bring in, which is called the marginal revenue product (MRP). In this case, the MRP is $200, meaning that the new worker can help the firm earn an extra $200. However, the firm also needs to consider how much it costs to hire that worker, known as the marginal factor cost (MFC), which is $150 here. Since the MRP of $200 is greater than the MFC of $150, the firm makes an additional profit of $50 for hiring that worker. Therefore, hiring this worker is a good decision for the firm because it increases its overall profit.
Detailed Explanation
The extra worker brings in $200, but costs $150. Other options are incorrect because This answer suggests that hiring the worker costs more than it earns; This choice implies that hiring the worker changes nothing.
Key Concepts
Marginal Revenue Product
Marginal Factor Cost
Profit Maximization
Topic
Marginal Revenue and Profit Calculations
Difficulty
hard level question
Cognitive Level
understand
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