Learning Path
Question & Answer1
Understand Question2
Review Options3
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Explore TopicChoose the Best Answer
A
The firm is able to sell its product at a higher price due to increased demand.
B
The marginal product of labor has decreased, making each additional worker less productive.
C
The firm has decided to reduce wages, leading to a lower MRPL.
D
The firm has increased the number of workers without a change in output.
Understanding the Answer
Let's break down why this is correct
Answer
When a firm sees an increase in its marginal revenue product of labor, it usually means that each additional worker is generating more revenue for the company. This can happen for several reasons, such as improved technology, better training for workers, or an increase in demand for the firm's products. For example, if a factory invests in new machinery that helps workers produce more goods in less time, the value of what each worker creates will rise. As a result, the firm can sell more products or sell them at a higher price, leading to increased revenue. Therefore, the underlying reason for the increase in marginal revenue product of labor is often linked to factors that enhance productivity or market conditions.
Detailed Explanation
When a firm sells its product for a higher price, it earns more money for each item sold. Other options are incorrect because If the productivity of workers decreases, they create less value; Lower wages do not increase the value workers bring to the firm.
Key Concepts
Marginal Revenue Product of Labor
Demand for Labor
Marginal Product of Labor
Topic
Marginal Revenue Product of Labor
Difficulty
medium level question
Cognitive Level
understand
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