Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Calculate the Marginal Product of Labor
B
Determine the Marginal Revenue
C
Calculate the Marginal Revenue Product of Labor
D
Compare MRPL to the wage rate
Understanding the Answer
Let's break down why this is correct
Answer
To determine the optimal level of labor hiring using the Marginal Revenue Product of Labor (MRP), a firm first needs to understand what MRP is. MRP is the additional revenue generated from hiring one more worker. The firm should calculate the MRP for each worker, which involves looking at how much extra output each worker produces and how much that output sells for. Once the firm knows the MRP, it should compare it to the wage it pays each worker. If the MRP of hiring an additional worker is greater than the wage, it makes sense to hire more workers.
Detailed Explanation
First, a firm needs to find out how much extra output each new worker can produce. Other options are incorrect because Some might think they should find the Marginal Revenue first; Calculating the Marginal Revenue Product of Labor is important, but it comes after finding the Marginal Product.
Key Concepts
Marginal Revenue Product of Labor
Optimal hiring decisions
Wage setting
Topic
Marginal Revenue Product of Labor
Difficulty
easy level question
Cognitive Level
understand
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