Question

The value of marginal product of labor increases if ________.

A. more labor is hired
B. more of the good is produced
C. the market price of the good produced rises
D. using a new technology reduces the demand for labor

Answer 1

The value of the marginal product of labor increases if the market price of the good produced rises. The correct option is c.

Step-by-step explanation:

The value of the marginal product of labor increases if the market price of the good produced rises.

When the market price of the good increases, producers can earn more profit by selling each unit of the good, which makes each additional unit of labor more valuable. As a result, the value of the marginal product of labor increases.

For example, let's say a company produces widgets and can sell each widget for $10. If the company hires an additional worker and that worker produces 5 widgets per hour, that means the worker's contribution to the company's revenue is $50 per hour.

However, if the market price of widgets increases to $15, then each widget's contribution to revenue becomes $75 per hour when produced by that additional worker. Therefore, the value of the marginal product of labor increases. The correct option is c.