When the price of the firm's product increases, marginal revenue obtained from selling additional units _____, which _____ marginal revenue product of labor (MRP_L). A) increases; decreases B) decreases; increases C) decreases; decreases D) increases; increases

Question

Quizplus · Accepted Answer

When the price of a firm's product increases, the marginal revenue obtained from selling additional units also increases because marginal revenue is directly related to the price. Consequently, the marginal revenue product of labor, which is the additional revenue a firm earns by employing one more unit of labor, also increases because it is based on the marginal revenue from selling additional output produced by that extra unit of labor.

When the Price of the Firm's Product Increases, Marginal Revenue