Firms use information on labor's marginal revenue product to determine what?


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Rich Blundell answered
Sounds like a homework question?!Marginal revenue is the extra revenue a firm gets from making a change, in this case adding more labour. The 'marginal revenue product of labour' is the extra revenue from each unit of labour (a worker). Firms would use it to work out the maximum they can afford to pay in wages for the extra labour, since they would still need to make a profit on the extra production.

The extra labour in practice is likely to be contract or temporary labour, that tops up the core workforce, so wage rates are likely to be different to the core workforce (probably higher).

This entry in wikipedia is quite helpful for more information

The firm would also think about the other 'marginal costs of production'. If for example the labour was for packing boxes on a production line, other marginal costs would include the cost of the extra items going into the boxes, and the boxes themselves.

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