Asked by Vhukhudo Mukhudwane on Jun 09, 2024
Verified
If hiring the 6th worker increases total product by 7 units and the price of each unit is $2,
A) the firm should not hire the 6th worker as MR<MC
B) marginal revenue equals $2
C) the firm should hire the 6th worker as MR>MC
D) the firm should not hire the 6th worker as MR<TC
Marginal Revenue
The additional income generated from selling one more unit of a good or service.
Marginal Cost
The cost of producing one additional unit of a product or service.
Total Product
The overall quantity of goods or services produced by a firm or an economy over a specific period, often used to measure productivity.
- Acquire understanding regarding the connection between marginal cost (MC), marginal revenue (MR), and how these factors influence decisions related to hiring and production.
- Understand the economic reasoning for making investment choices by analyzing the relationship between marginal cost and marginal revenue.
Verified Answer
SH
SHEAK HABIBUR RAHAMANJun 10, 2024
Final Answer :
C
Explanation :
Since hiring the 6th worker increases total product by 7 units, the marginal product of the 6th worker is 7.
Assuming the firm is a price taker and the price of each unit is $2, the marginal revenue (MR) is also $2.
Therefore, the marginal cost (MC) of hiring the 6th worker should be less than $2 for the firm to hire the worker.
Since we don't have information on the marginal cost, we cannot say for sure whether the firm should hire the worker from a profit-maximizing perspective based on cost. However, given that MR>MC, the firm should hire the 6th worker from a revenue-maximizing perspective. Thus, the correct answer is C.
Assuming the firm is a price taker and the price of each unit is $2, the marginal revenue (MR) is also $2.
Therefore, the marginal cost (MC) of hiring the 6th worker should be less than $2 for the firm to hire the worker.
Since we don't have information on the marginal cost, we cannot say for sure whether the firm should hire the worker from a profit-maximizing perspective based on cost. However, given that MR>MC, the firm should hire the 6th worker from a revenue-maximizing perspective. Thus, the correct answer is C.
Learning Objectives
- Acquire understanding regarding the connection between marginal cost (MC), marginal revenue (MR), and how these factors influence decisions related to hiring and production.
- Understand the economic reasoning for making investment choices by analyzing the relationship between marginal cost and marginal revenue.