Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Increased MRP causes firms to hire more workers
B
Decreased MFC leads to higher employment levels
C
Increased labor productivity reduces the need for new workers
D
Higher wages always increase MRP
Understanding the Answer
Let's break down why this is correct
Answer
The relationship between Marginal Revenue Product (MRP) and Marginal Factor Cost (MFC) can be compared to supply and demand because both show how the value of an additional unit affects decisions. When technology improves labor productivity, it can increase the MRP because workers can produce more goods in the same amount of time. This means that businesses can earn more revenue from the same number of workers, similar to how higher demand can increase prices in a market. For example, if a factory uses new machines that double the output of its workers, the MRP rises, making it more profitable to hire additional labor, just like a rise in demand would push prices up. Thus, the increase in productivity shifts the MRP curve upward, reflecting a higher value for labor in the market.
Detailed Explanation
When MRP goes up, it means each worker is making more money for the company. Other options are incorrect because Some might think that lower costs always mean more jobs; It's a common belief that better productivity means fewer workers are needed.
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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