Marginal revenue product determines the highest wage that a firm is willing to pay its workers.

Question

Quizplus · Accepted Answer

Marginal revenue product (MRP) is the additional revenue that a firm generates from hiring one more worker. It represents the contribution of each worker to the overall output and revenue of the firm. The firm will continue to hire workers as long as the MRP is higher than the wage paid to the workers. Therefore, MRP determines the highest wage that a firm is willing to pay its workers.

Marginal Revenue Product Determines the Highest Wage That a Firm