Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Hire more workers to increase profit
B
Reduce the number of workers
C
Maintain the current number of workers
D
Increase wages for existing workers
Understanding the Answer
Let's break down why this is correct
Answer
If a firm discovers that the marginal revenue product of labor is greater than the wage it pays, it means that each additional worker contributes more to the firm's revenue than what it costs to employ them. In this situation, the firm should consider hiring more workers. For example, if a worker generates $100 in revenue but costs the firm only $80 in wages, the firm benefits by adding that worker. By hiring more labor, the firm can increase its overall output and profits. This analysis helps the firm make smart decisions about its workforce to maximize its earnings.
Detailed Explanation
When the extra money made from hiring a worker is more than what you pay them, it's smart to hire more. Other options are incorrect because Some might think cutting workers saves money; Keeping the same number of workers might seem safe.
Key Concepts
Marginal Revenue Product
Labor Demand
Wage Determination
Topic
Marginal Revenue Product Analysis
Difficulty
easy level question
Cognitive Level
understand
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