Question

Consider Figure 28-7. Suppose that the monopolist is contemplating hiring 14 units of labor, which it knows would cause the marginal product to decline to 150 units of output per unit of labor. The product price also decreases to \(4.50 per unit, and the firm's marginal revenue declines to \)3.20 per unit. What would be the firm's marginal revenue product if it hires a 14th unit of labor?

Short answer

The firm's marginal revenue product if it hires a$14th$ unit of labor is$\$480$

Step-by-step solution

Given Information 

Marginal revenue is the expansion in income that outcomes from the offer of one extra unit of the result. While negligible income can stay consistent over a specific degree of result, it keeps from the pattern of consistent, unavoidable losses and will ultimately dial back as the result level increments.

Explanation

Calculating the marginal product,

Marginal product = $\frac{\text{changeintheproductionoutput}}{\text{changeininputlabour}}$

$\begin{array}{rl}& MP=\frac{\mathrm{\Delta }TP}{\mathrm{\Delta }L}\\ & MP=150\\ & MR=\mathrm{\$}3.20\end{array}$

Marginal revenue product is

$\begin{array}{rl}& MRP=MR\times MP\\ & MRP=\mathrm{\$}3.20\times 150\\ & MRP=\mathrm{\$}480\end{array}$

Hence the firm's marginal revenue product is$\$480$.