Jim Smith runs a company that sells encyclopedia sets for $200 each. When he employs 5 workers, they can sell 20 sets per week, whereas only 17 sets are sold when 4 workers are employed. What is the weekly marginal revenue product of the fifth worker?
A) $3
B) $200
C) $600
D) $4,000

Question

Quizplus · Accepted Answer

To find the marginal revenue product (MRP) of the fifth worker, we need to find out how much additional revenue the fifth worker generates compared to the fourth worker.

When there are 4 workers, the company sells 17 sets, which means each worker contributes 17/4 or 4.25 sets to the sales. When there are 5 workers, the company sells 20 sets, which means each worker contributes 20/5 or 4 sets to the sales. The difference between these two is 0.75 sets.

So, the MRP of the fifth worker is the additional revenue generated by selling these extra 0.75 sets.

0.75 x $200 = $150

Therefore, the weekly marginal revenue product of the fifth worker is $150, which is Choice C.

Jim Smith Runs a Company That Sells Encyclopedia Sets for $200