Assess the degree of difficulty associated with measuring marginal revenue produ

Question

Assess the degree of difficulty associated with measuring marginal revenue product for each of the following occupations. Provide a brief explanation in each case. A. Automobile mechanic B. College professor Hint: Make sure you know the definition for marginal revenue product. When an additional mechanic is hired, how much additional (marginal) revenue will that mechanic generate for the dealership or independent repair shop? Is there a way of measuring the marginal revenue? If a college hires another professor, how much marginal revenue will that professor generate for the college? Is there a way of measuring marginal revenue in this situation?

Explanation / Answer

Additional mechanic hired then per hour wage will be the cost to dealership or independent repair shop.

For dealership, it will be additional knowledge or skillset is learned by mechanic along with extra wage & in an independent repair shop from the skillset learned mechanic increases his output/production. Per hour forgone is his opportunity cost devoted to some other activity.

Rising wages for car mechanics will produce movement along the supply curve only.

B. College professor Hint: Make sure you know the definition for marginal revenue product.

Per hour a professor devotes & invests his time in the educational activity is the amount he generates * number of students learning from him. If the professor chooses leisure activity then this is his opportunity cost in forgoing per hour wages. If already number of professor have added up and college is staffing up more people then MPL will be negative. If the students demand is there and professors are less then MPL is positive. To the point where professor devoted time= per hour wages earned=number of students learning is the breakeven point

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