Asked by Annabelle Beauchamp on Jun 20, 2024
Verified
If a firm's marginal revenue product of labor is $100 and it pays a wage rate of $85,
A) the firm should reduce the wage it pays.
B) the firm is maximizing its profits.
C) the law of diminishing marginal productivity is being observed.
D) the firm can raise its profits by increasing the number of workers.
Marginal Revenue Product
The additional revenue generated from the sale of one more unit of a good or service produced as the result of one more unit of an input.
Wage Rate
The fixed amount of compensation or payment received by an employee from an employer in exchange for work or services performed.
Labor
Refers to human effort, whether physical or mental, used in the production of goods and services.
- Identify how marginal revenue product influences a firm's requirement for labor and other inputs.
- Outline the ramifications of technological evolution on the marginal efficiency of labor and the ensuing changes in employment opportunities.
Verified Answer
NT
Nikki TrussellJun 27, 2024
Final Answer :
D
Explanation :
The marginal revenue product of labor represents the additional revenue a firm earns from hiring one more worker. If this amount ($100) is greater than the wage rate ($85), hiring more workers will increase profits, as each additional worker generates more revenue than their cost.
Learning Objectives
- Identify how marginal revenue product influences a firm's requirement for labor and other inputs.
- Outline the ramifications of technological evolution on the marginal efficiency of labor and the ensuing changes in employment opportunities.