Consider labour hired for $1000 per week.If the last week of labour hired produces 0.25 units of output which sells for $5000 per unit,________ labour should be hired in this situation since the wage is ________ MRP.
A)more; greater than
B)more; less than
C)less; greater than
D)less; less than
E)no; equal to

Question

Quizplus · Accepted Answer

The marginal revenue product (MRP) of the last week of labor can be calculated by multiplying the output produced by the selling price per unit:
MRP = 0.25 x $5000 = $1250
Since the wage paid is $1000 per week, the MRP is greater than the wage. This indicates that hiring more labor could increase profits. Therefore, "more" labor should be hired in this situation, and the wage paid is "less than" the MRP. Option B is the correct choice.

Consider Labour Hired for $1000 Per Week