Company A has just discovered that the marginal revenue product generated by the last worker hired was $80 while the marginal factor cost was $90. What should Company A do?

Question

Quizplus · Accepted Answer

Since the marginal factor cost ($90) is greater than the marginal revenue product ($80), the cost of hiring an additional worker exceeds the additional value that worker generates. Therefore, Company A should reduce the amount produced to avoid incurring losses.

Company a Has Just Discovered That the Marginal Revenue Product