A worker adds $900 in income and receives a wage of $700. According to the marginal decision rule, what should the manager do?

### Why this is right The worker adds $900 in income and costs $700 in wages, so the additional value exceeds the additional cost. The marginal decision rule therefore gives the manager an incentive to hire. ### The concept Marginal value product is the additional income generated by one additional unit of labor. Comparing it with the wage tests whether that worker adds more income than the wage paid. ### The other options - **B. Reject the worker because the wage exceeds marginal value product**: The stated values show the reverse: $900 is greater than $700. - **C. Stop hiring because marginal value product equals the wage**: The values are not equal. - **D. Ignore the comparison because wages are not input costs**: The wage is the price of labor and is exactly the cost used in the rule. ### Worked numbers - **Given**: Marginal value product is $900; wage is $700. - **Find**: Whether to hire the additional worker. - **Formula**: Compare marginal value product with wage. - **Solve**: $900 > $700, so marginal value product exceeds the wage. - **Answer**: Hire on the basis of this rule. - **Check**: The additional income is greater than the additional wage cost. ### Terms - **Marginal value product (MVP)**: The additional income generated by one additional unit of labor. - **Wage**: The price paid for labor. ### Remember Hire when the added value is greater than the added wage cost.