Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It will decrease
B
It will increase
C
It will stay the same
D
It will become negative
Understanding the Answer
Let's break down why this is correct
Answer
In a perfectly competitive labor market, the marginal product of labor refers to the additional output produced by one more worker. If the marginal product of labor increases while the output price stays the same, the marginal revenue product of labor will also increase. This is because the marginal revenue product is calculated by multiplying the marginal product of labor by the price of the output. For example, if hiring one more worker increases output by 5 units and the price of each unit is $10, then the marginal revenue product is $50. So, if the output produced by that worker increases to 7 units, the marginal revenue product rises to $70, showing that more productive workers create more value for the company.
Detailed Explanation
When the marginal product of labor goes up, it means each worker is producing more. Other options are incorrect because Some might think that more output could lower the value of each worker's contribution; It's a common mistake to think that changes in output don't affect revenue.
Key Concepts
marginal product
labor market equilibrium
output price
Topic
Marginal Revenue Product of Labor
Difficulty
hard level question
Cognitive Level
understand
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