If one more baker is hired the output of a bakery will increase from 1250 breads to 1400 breads per day, but then the bakery will have to reduce the price of the bread from Rs 15 to Rs 14 per unit to sell the additional output, the marginal revenue product of the last baker is __________
- ARs 850
- BRs 150
- CRs 1960
- DRs 1875
Solution & Step-by-step Explanation
Marginal Revenue Product (MRP) is the change in total revenue resulting from employing one additional unit of labor.
Initial Total Revenue (TR
1
):
TR
1
=1250×15=Rs 18750
New Total Revenue (TR
2
) after hiring the new baker:
TR
2
=1400×14=Rs 19600
Marginal Revenue Product (MRP):
MRP=TR
2
−TR
1
=19600−18750=Rs 850
Initial Total Revenue (TR
1
):
TR
1
=1250×15=Rs 18750
New Total Revenue (TR
2
) after hiring the new baker:
TR
2
=1400×14=Rs 19600
Marginal Revenue Product (MRP):
MRP=TR
2
−TR
1
=19600−18750=Rs 850