If MRP MLC,it means that a firm should
A)use less labor.
B)use more labor.
C)increase its fixed capacity.
D)decrease its fixed capacity.

Question

If MRP > MLC,it means that a firm should
A)use less labor.
B)use more labor.
C)increase its fixed capacity.
D)decrease its fixed capacity.

Quizplus · Accepted Answer

When MRP (Marginal Revenue Product) is greater than MLC (Marginal Labor Cost), it means that the additional product produced by hiring one more unit of labor is generating more revenue than the cost of hiring that labor. Therefore, the firm should increase its labor utilization to produce more and increase profits.

If MRP > MLC,it Means That a Firm Should