Asked by eunice morel on Jul 25, 2024
Verified
Assume that a restaurant is hiring labor in an amount such that the MRC of the last worker is $16 and her MRP is $12.On the basis of this information,we can say that:
A) profits will be increased by hiring additional workers.
B) profits will be increased by hiring fewer workers.
C) marginal revenue product must exceed average revenue product.
D) the restaurant is maximizing profits.
Marginal Revenue Product
The extra income created by the use of an additional unit of a production input.
Marginal Resource Cost
Marginal Resource Cost is the additional cost incurred by obtaining one more unit of a resource, such as labor or raw materials, used in the production of goods and services.
Profits
The financial gain realized when the revenues from business activities exceed the expenses, costs, and taxes needed to sustain the activity.
- Recognize the importance of marginal revenue product (MRP) and its influence on the process of making hiring decisions.
- Analyze the relationship between wage rate changes and employment decisions for firms in different market structures.
Verified Answer
ZK
Zybrea KnightAug 01, 2024
Final Answer :
B
Explanation :
Since the MRP of the last worker is less than the MRC, it implies that the additional worker will contribute less to the revenue generated by the restaurant than what it will cost (MRC) to hire that worker. This suggests that the restaurant is currently over-laboring and should reduce the number of workers to increase profits.
Learning Objectives
- Recognize the importance of marginal revenue product (MRP) and its influence on the process of making hiring decisions.
- Analyze the relationship between wage rate changes and employment decisions for firms in different market structures.