Asked by Ermina Coronas on Jul 04, 2024
Verified
A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired, 32 when two workers are hired, 37 when three are hired, and 40 when four are hired. The farmer's product sells for $4 per unit, and the wage rate is $30 per worker. The marginal revenue product of the third worker is
A) $5
B) $148
C) $-10
D) $20
Marginal Revenue Product
The additional revenue a firm generates from employing one more unit of input, such as labor or capital.
Wage Rate
The amount of compensation paid to an employee by an employer in exchange for work performed, typically expressed on an hourly, daily, or piecework basis.
- Absorb the principle of Marginal Revenue Product (MRP) and its significance in formulating hiring strategies.
- Determine the environments in which the acquisition of extra labor is monetary wise or culminates in the escalation of profits.
Verified Answer
LA
Lauren AvilaJul 06, 2024
Final Answer :
D
Explanation :
The marginal revenue product (MRP) of the third worker is calculated by the increase in total product (output) due to hiring the third worker, multiplied by the price per unit. The total product increases from 32 units with two workers to 37 units with three workers, an increase of 5 units. At $4 per unit, the MRP of the third worker is 5 units * $4/unit = $20.
Learning Objectives
- Absorb the principle of Marginal Revenue Product (MRP) and its significance in formulating hiring strategies.
- Determine the environments in which the acquisition of extra labor is monetary wise or culminates in the escalation of profits.