Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
As marginal revenue increases, the marginal revenue product of labor decreases.
B
Marginal revenue product of labor is always equal to marginal revenue.
C
Marginal revenue product of labor increases as long as marginal revenue increases.
D
There is no relationship between marginal revenue and marginal revenue product of labor.
Understanding the Answer
Let's break down why this is correct
Answer
Marginal revenue is the extra money a company makes from selling one more unit of a product, while the marginal revenue product of labor (MRP) is the additional revenue generated by hiring one more worker. When a company hires more workers, the MRP helps determine if the cost of hiring those workers is worth it. For example, if a new worker can produce enough extra goods to bring in $200, and their wage is $150, the company benefits from hiring them because the MRP ($200) is greater than the wage ($150). However, if the MRP drops below the wage, it would not make sense to hire more workers, as it would cost the company money. Therefore, understanding both concepts helps businesses make better decisions about hiring.
Detailed Explanation
When you hire more workers, the extra money you make from selling more products can increase. Other options are incorrect because This suggests that as you earn more money, each worker's value goes down; This says that the value of workers is always the same as the money made from sales.
Key Concepts
marginal revenue
input factor relationship
Topic
Marginal Revenue Product of Labor
Difficulty
medium level question
Cognitive Level
understand
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