Asked by Penny Huang on Jun 29, 2024
Verified
If Tie-Dyed T-Shirts is currently employing labor so that the wage is less than the marginal revenue product of labor, it must also be true that
A) total revenues would be greater than total costs.
B) the wage is greater than marginal cost.
C) the price of the product must be less than marginal cost.
D) the price of the product must be greater than marginal cost.
Marginal Revenue Product
The additional revenue generated by employing one more unit of a resource or factor of production.
Marginal Cost
is the change in total production cost that arises when the quantity produced is incremented by one unit, reflecting the cost of producing one additional unit of a good or service.
- Investigate the role of marginal revenue product in ascertaining the optimal labor employment quantity.
- Comprehend how variations in output price influence labor demand and the marginal revenue product of labor.
Verified Answer
GG
Gerrell GuppyJul 03, 2024
Final Answer :
D
Explanation :
If the wage is less than the marginal revenue product of labor, it means that each additional unit of labor is adding more to revenue than it costs, implying that the price at which the product is sold (which influences marginal revenue) must be greater than the marginal cost of producing it. This is because the marginal revenue product of labor is a function of the additional output that the labor produces and the price at which that output can be sold.
Learning Objectives
- Investigate the role of marginal revenue product in ascertaining the optimal labor employment quantity.
- Comprehend how variations in output price influence labor demand and the marginal revenue product of labor.