Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Minimum Wage
B
Optimal Production Level
C
Profit Maximization
D
Total Cost of Production
Understanding the Answer
Let's break down why this is correct
Answer
The Marginal Revenue Product of Labor (MRPL) helps businesses decide how many workers to hire by showing the additional revenue generated from hiring one more worker. The optimal hiring level occurs when the MRPL equals the Marginal Cost (MC) of hiring that worker. This means that a company should continue to hire workers until the money made from their work is equal to what it costs to employ them. For example, if hiring one more worker increases revenue by $100 but costs $100, this is the point where hiring is optimal. Therefore, just like MRPL guides hiring decisions, the relationship between MRPL and MC helps ensure that a company remains profitable while growing its workforce.
Detailed Explanation
Profit maximization happens when a business hires workers until the cost of hiring equals the extra money made. Other options are incorrect because Minimum wage is the lowest pay allowed by law; Optimal production level is about how much to make, not the cost of making it.
Key Concepts
Marginal Revenue Product of Labor
Profit Maximization
Labor Economics
Topic
Marginal Revenue Product of Labor
Difficulty
medium level question
Cognitive Level
understand
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