Assume that a restaurant is hiring labor in an amount such that the MRC of the last worker is $16 and her MRP is $12. On the basis of this information, we can say that
A) profits will be increased by hiring additional workers.
B) profits will be increased by hiring fewer workers.
C) marginal revenue product must exceed average revenue product.
D) the restaurant is maximizing profits.

Question

Quizplus · Accepted Answer

The MRC should always be less than MRP to maximize profits. In this case, MRC is greater than MRP, which means the restaurant is overpaying the last worker. Therefore, profits can be increased by hiring fewer workers.

Assume That a Restaurant Is Hiring Labor in an Amount