Question

What is marginal revenue product of labour?

Hint:

The MRP of labour is used by firms to determine how many workers to hire, as it helps assess the value of additional labour.

Answer 1

Step 1: Understanding marginal revenue product of labour.
The marginal revenue product (MRP) of labour is the additional revenue generated by employing one more unit of labour. It is calculated as the marginal product of labour (MPL) multiplied by the price of the good produced. The formula is: \[ MRP_L = MPL \times P \] where \( MPL \) is the additional output produced by an additional worker, and \( P \) is the price of the product.

Step 2: Conclusion.
Thus, the marginal revenue product of labour represents the value of an additional unit of labour in terms of the revenue it generates for the firm.