Assume that a restaurant is hiring labor in an amount such that the MRC of the last worker is $16 and her MRP is $12.On the basis of this information we can say that:A. profits will be increased by hiring additional workers.B. profits will be increased by hiring fewer workers.C. marginal revenue productmust exceed average revenueproduct.D. the restaurant is maximizing profits.

Question

07-12-2019
Business

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Assume that a restaurant is hiring labor in an amount such that the MRC of the last worker is $16 and her MRP is $12.On the basis of this information we can say that:A. profits will be increased by hiring additional workers.B. profits will be increased by hiring fewer workers.C. marginal revenue productmust exceed average revenueproduct.D. the restaurant is maximizing profits.

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DelcieRiveria DelcieRiveria · Answer 1 · 2019-12-09T07:43:06+01:00

Answer:

The correct answer is option B.

Explanation:

A restaurant is hiring labor.

The marginal revenue cost of the last worker is $16.

The marginal revenue product of the last worker is $12.

We see that the marginal revenue cost is higher than the marginal revenue product.

This implies that the cost incurred in hiring the last worker is higher than the marginal contribution from the last worker.

So the restaurant can maximize profit by hiring fewer workers. The profit-maximizing level will be where the marginal revenue cost will be equal to marginal revenue product.