Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
MRP decreases
B
MRP remains the same
C
MRP increases
D
MRP becomes zero
Understanding the Answer
Let's break down why this is correct
Answer
The marginal revenue product (MRP) of labor is the additional revenue generated from hiring one more worker. When the marginal product (MP) of labor increases, this means that each worker is producing more output than before. Since the price of the output remains constant, the extra output from the increased MP will also lead to higher revenue. For example, if a worker used to produce 10 units of a product, but now produces 15 units, the MRP increases because the company earns more from selling those additional units. Therefore, when the MP of labor rises, the MRP of labor also increases, reflecting the greater value each worker brings to the business.
Detailed Explanation
When the marginal product of labor goes up, it means each worker is making more goods. Other options are incorrect because Some might think that MRP goes down when MP goes up; It's a common mistake to think MRP stays the same.
Key Concepts
Marginal Revenue Product
Marginal Product
Topic
Marginal Revenue Product Analysis
Difficulty
medium level question
Cognitive Level
understand
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