The marginal revenue product
A) is the product of the marginal product of labor and the price of the output.
B) eventually increases as labor input increases.
C) measures the benefit to the firm from hiring an additional unit of labor.
D) Both A and C are correct.

Question

Quizplus · Accepted Answer

The marginal revenue product is calculated as the product of the marginal product of labor (the additional output produced by hiring one more unit of labor) and the price of the output. It measures the benefit to the firm from hiring an additional unit of labor, making both statements A and C correct. As the amount of labor input increases, the marginal product of labor may eventually decrease, which may cause a decrease in marginal revenue product. Therefore, statement B is not correct.

The Marginal Revenue Product