Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It increases indefinitely
B
It decreases after a certain point
C
It remains constant
D
It becomes negative
Understanding the Answer
Let's break down why this is correct
Answer
The marginal revenue product of labor (MRP) refers to the additional revenue generated from hiring one more worker. When we add more workers to a production process, each worker contributes less to total output than the previous one, a situation known as diminishing returns. This means that while the total output might increase, the increase in revenue from each additional worker becomes smaller. For example, if a bakery hires one baker, the output significantly increases, but if they hire a second baker, the additional bread produced may not be as much as the first. As a result, the marginal revenue product of labor decreases as more units of labor are added, reflecting the fact that each new worker is less productive than the last.
Detailed Explanation
As you hire more workers, each new worker adds less value than the one before. Other options are incorrect because Some might think that adding workers always increases value; It's a common mistake to think that value stays the same with more workers.
Key Concepts
diminishing returns
Topic
Marginal Revenue Product of Labor
Difficulty
easy level question
Cognitive Level
understand
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