Asked by Jocelyn 30545 Leon on May 03, 2024
Verified
The change in a firm's total revenue that results from hiring an additional worker is measured by:
A) the marginal product.
B) the marginal revenue.
C) the marginal revenue product.
D) the average revenue product.
Marginal Revenue Product
This is the additional revenue generated from employing one more unit of a factor of production, such as labor.
Total Revenue
The total amount of money received by a company for goods sold or services provided during a certain time period.
Average Revenue Product
The increase in total revenue resulting from employing one more unit of a resource, holding all other factors constant.
- Gain insight into the notion of marginal revenue product (MRP) and its crucial role in decisions regarding hiring.
Verified Answer
SG
SYDNEY GARDNERMay 06, 2024
Final Answer :
C
Explanation :
The change in a firm's total revenue that results from hiring an additional worker is measured by the marginal revenue product, which is the marginal product of labor multiplied by the marginal revenue. This represents the additional revenue generated by the last worker hired. Option A is incorrect because marginal product only measures the amount of additional output generated by hiring an additional worker, but not the revenue. Option B is incorrect because marginal revenue only measures the additional revenue generated by selling one more unit of output, but not the revenue generated by hiring an additional worker. Option D is incorrect because average revenue product is the firm's total revenue divided by the number of workers, which doesn't represent the change in revenue from hiring an additional worker.
Learning Objectives
- Gain insight into the notion of marginal revenue product (MRP) and its crucial role in decisions regarding hiring.