Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The firm will hire more workers because MRP increases.
B
The firm will reduce wages to maintain profitability.
C
The firm will hire fewer workers due to increased productivity.
D
The firm will not change its labor demand as technology has no effect.
Understanding the Answer
Let's break down why this is correct
Answer
When a firm discovers a new technology that makes its workers more productive, it can produce more goods in the same amount of time. This increase in productivity means that each worker can generate more revenue for the firm. Because of this, the firm is likely to demand more workers to take advantage of the higher output and revenue potential. For example, if a factory uses a new machine that allows each worker to produce twice as many toys in a day, the firm may hire additional workers to meet the increased demand for toys. Overall, the improved technology leads to higher labor demand as the firm seeks to maximize its profits.
Detailed Explanation
When workers are more productive, they can produce more goods. Other options are incorrect because Some might think that lowering wages is the only way to stay profitable; This option suggests that fewer workers are needed because they are more productive.
Key Concepts
Marginal Revenue Product
Labor Demand
Wage Determination
Topic
Marginal Revenue Product Analysis
Difficulty
medium level question
Cognitive Level
understand
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