Asked by Stacey Nolasco on Jun 08, 2024
Verified
If the marginal revenue product (MRP) of labor is less than the wage rate,
A) the firm is making profits.
B) the firm is incurring losses.
C) more labor should be employed.
D) less labor should be employed.
Marginal Revenue Product
The additional revenue generated by employing one more unit of a resource, such as labor or capital, holding all other inputs constant.
Wage Rate
The amount of compensation paid to an employee per unit of time, often hourly or annually, reflecting the price of labor in a market.
Labor
The effort by humans to produce goods or services in exchange for wages or other forms of compensation.
- Acquire knowledge on the connection between the Marginal Revenue Product (MRP) and the decision-making process for hiring in competitive marketplaces.
Verified Answer
DD
Destiny DvorakJun 13, 2024
Final Answer :
D
Explanation :
When the marginal revenue product of labor is less than the wage rate, it means that each additional unit of labor is adding less to the firm's revenue than it costs to employ, suggesting that the firm should employ less labor to increase or maximize profitability.
Learning Objectives
- Acquire knowledge on the connection between the Marginal Revenue Product (MRP) and the decision-making process for hiring in competitive marketplaces.