Suppose that a unit of labor costs $20 per hour. The price of the product being made costs $4 per unit. If this is the case, how much must a worker produce in each hour to obtain a marginal revenue product of $60?
A)15
B)80
C)3
D)10

Question

Quizplus · Accepted Answer

In this scenario, the worker must produce 15 items an hour to obtain a marginal revenue product of $60.
Key Takeaway: Remember that the equation for marginal revenue product is equal to the marginal product multiplied by the product price: MRPl = MPL x Pprod. In this scenario, we have the marginal revenue product ($60) and we have the product price ($4), but we need the marginal product. You would use the equation: MRPl/Pprod = MPL. $60/4 = 15.

Suppose That a Unit of Labor Costs $20 Per Hour