You find that you have a backlog of orders due to an increase in demand for your product.You determine that if you hire one more person you will be able to increase your sales volume by $300 because of projected output by this extra person.Wages per day for this extra person will be $100.The marginal revenue product for this extra worker is

Question

Quizplus · Accepted Answer

To calculate marginal revenue product, we use the formula MRP = MP x MR, where MP is the marginal product (increase in output due to one additional worker) and MR is the marginal revenue (the additional revenue generated from selling one more unit of product).

We are given that hiring one more person will increase sales volume by $300, so MR = $300. We are also given that wages per day for this extra person will be $100. Therefore, the marginal product must be 3 units of product per day (since $300 ÷ $100 = 3).

So, MRP = 3 units per day x $300 per unit = $900 per day.

Therefore, the best choice is C, as the marginal revenue product for this extra worker is $900 per day, which is greater than the cost of their wages.

You Find That You Have a Backlog of Orders Due