Multiple Choice
Which of the following best describes the marginal revenue product (MRP) of labor in the context of a firm's production function?
15. Markets for the Factors of Production
The Production Function and Marginal Revenue Product
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The marginal revenue product of labor is the:
A
wage paid to each worker
B
additional revenue generated from employing one more unit of labor
C
additional output produced by one more unit of labor
D
total revenue divided by the number of workers employed
Verified step by step guidance1
Understand the concept of Marginal Revenue Product of Labor (MRP_L), which measures the additional revenue a firm earns by employing one more unit of labor.
Recall that MRP_L is calculated as the product of the Marginal Product of Labor (MPL) and the Marginal Revenue (MR) from selling the additional output produced by that labor.
Express this relationship mathematically as: \(\text{MRP}_L = \text{MPL} \times \text{MR}\), where MPL is the additional output from one more worker and MR is the additional revenue from selling one more unit of output.
Recognize that the wage paid to each worker is the cost of employing labor, not the revenue generated, so it is different from MRP_L.
Conclude that the Marginal Revenue Product of Labor represents the additional revenue generated from employing one more unit of labor, which aligns with the correct answer.
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