The marginal revenue product establishes
A)An upper limit to the wage rate an employer is willing and able to pay.
B)A lower limit to profit on the sale of a unit of output.
C)A lower limit to the productivity of a worker.
D)A lower limit to the wage rate demands of laborers.

Question

Quizplus · Accepted Answer

The marginal revenue product is the additional revenue a firm generates from hiring one more unit of labor. It establishes an upper limit to the wage rate an employer is willing and able to pay because if the wage rate exceeds the marginal revenue product, the firm would not hire additional labor since it would not generate enough revenue to cover the cost of the additional wages.

The Marginal Revenue Product Establishes