Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Firms will continue to hire additional workers as long as the MRP is greater than the wage paid to workers.
B
An increase in labor productivity will lower the MRP, leading to less hiring.
C
The MRP is equal to the additional revenue generated by hiring one more worker.
D
If the MRP equals the wage, firms will stop hiring additional workers.
E
Firms should aim to hire workers until the MRP is less than the marginal factor cost.
Understanding the Answer
Let's break down why this is correct
Answer
Marginal revenue product (MRP) analysis helps businesses understand how much additional revenue is generated by hiring one more worker. When a company considers hiring, it looks at the MRP to determine if the extra income from the new worker will exceed their wage. If the MRP is higher than the wage, it makes sense to hire because the company will earn more than it spends. For example, if a factory finds that hiring an additional worker will bring in $100 more each day, but the worker's wage is only $80, hiring them is beneficial. Therefore, MRP analysis guides companies in making informed labor decisions to maximize profits.
Detailed Explanation
None of the statements accurately describe how firms decide to hire workers based on MRP. Other options are incorrect because This suggests firms will always hire if MRP is higher than wages; This implies that better productivity lowers MRP.
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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