A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired, 32 when two workers are hired, 37 when three are hired, and 40 when four are hired. The farmer's product sells for $4 per unit, and the wage rate is $30 per worker. The marginal revenue product of the third worker is
A)$5
B)$148
C)$-10
D)$20

Question

Quizplus · Accepted Answer

The marginal revenue product (MRP) of the third worker is calculated by the increase in total product (output) due to hiring the third worker, multiplied by the price per unit. The total product increases from 32 units with two workers to 37 units with three workers, an increase of 5 units. At $4 per unit, the MRP of the third worker is 5 units * $4/unit = $20.

A Farmer Who Has Fixed Amounts of Land and Capital