Managerial Economicsintermediate
Arrange the steps a firm takes to make a hiring decision using the marginal decision rule, from first to last.
Answer
Calculate the marginal product of the additional worker, Multiply the marginal product by the product price to find marginal revenue product, Compare the marginal revenue product with the worker's wage, Hire the worker if marginal revenue product is at least equal to the wage
Explanation
### The order
1. **Estimate the additional income generated by the next worker**: This is the marginal value product needed for the decision.
2. **Identify the wage for that worker**: The wage is the additional labor cost.
3. **Compare marginal value product with the wage**: This establishes whether the added value exceeds, falls below, or equals the cost.
4. **Hire, reject, or stop according to the comparison**: Greater value supports hiring, lower value does not, and equality marks the stopping point.
### Remember
Estimate benefit and cost before applying the decision rule.
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