Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The additional revenue generated from hiring one more unit of labor
B
The total cost of hiring labor
C
The market price of labor
D
The average product of labor
Understanding the Answer
Let's break down why this is correct
Answer
The Marginal Revenue Product (MRP) of labor represents the additional revenue that a company earns by hiring one more worker. It is calculated by taking the extra output produced by that worker and multiplying it by the price at which the product is sold. For example, if a bakery hires an additional baker who can produce 20 loaves of bread per day, and each loaf sells for $3, the MRP of that baker would be $60 (20 loaves times $3). Understanding MRP helps businesses decide how many workers to hire, as they want to ensure that the revenue generated by each new worker exceeds their wage. This concept is important because it helps companies maximize their profits by balancing labor costs with the revenue generated from production.
Detailed Explanation
The MRP of labor shows how much extra money a company makes by hiring one more worker. Other options are incorrect because This option confuses cost with revenue; This choice mixes up the value of labor with its price.
Key Concepts
Labor Demand
Topic
Marginal Revenue Product Analysis
Difficulty
easy level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.