Bob's Baubles,Inc.,sells its product for $3 each in a perfectly competitive market.If it increases its workforce from 1,000 to 1,001,its output goes from 615 to 625 per day.Its marginal revenue product for the 1,001^st worker is:

Question

Quizplus · Accepted Answer

The marginal revenue product (MRP) is the change in total revenue that results from hiring one additional unit of labor.

To calculate the MRP, we need to first calculate the change in total output (MPL) and the change in total revenue (MTR) resulting from hiring the 1,001st worker.

MPL = (625 - 615) / (1001 - 1000) = 10

MTR = ($3 x 625) - ($3 x 615) = $30

MRP = MTR / MPL = $30 / 10 = $3

Therefore, the MRP for the 1,001st worker is $3.

Since Bob's Baubles, Inc. is operating in a perfectly competitive market, the firm should hire workers up to the point where the MRP equals the wage rate. In this case, the wage rate is not provided, so we cannot determine if the firm should hire the additional worker or not.