Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Hire the worker - MRP exceeds MFC, maximizing profit
B
Do not hire the worker - MFC exceeds MRP, minimizing costs
C
Hire the worker - MFC equals MRP, indicating no profit change
D
Do not hire the worker - MRP is irrelevant in this situation
Understanding the Answer
Let's break down why this is correct
Answer
When a company considers hiring an additional worker, it looks at the potential benefits and costs of that decision. The marginal revenue product (MRP) tells us how much extra money the new worker can generate for the company, which is $150 in this case. On the other hand, the marginal factor cost (MFC) is the cost of hiring that worker, which is $120. Since the MRP of $150 is greater than the MFC of $120, this hiring decision falls into a profitable category because the company stands to make more money from the worker than it will spend on them. Therefore, hiring this additional worker is a good choice for maximizing profit.
Detailed Explanation
The MRP shows how much money the worker can bring in. Other options are incorrect because This option thinks costs are more important than benefits; This option assumes hiring won't change profits.
Key Concepts
Profit Maximization in Labor Markets
Marginal Revenue Product
Marginal Factor Cost
Topic
Profit Maximization in Labor Markets
Difficulty
medium level question
Cognitive Level
understand
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