Rutgers Introduction to Microeconomics Practice Test

The value of the marginal product is calculated by multiplying the output generated by the next unit of input (such as an additional worker) by the price at which that output can be sold. This reflects the additional revenue that the last worker contributes to the overall production process.

When considering the contribution of that additional worker, it’s essential to evaluate both the quantity of output they produce and the selling price of that output to determine its economic value. This calculation is vital in microeconomics because it helps businesses decide how many workers to hire and evaluate whether the revenue generated by an additional worker exceeds the cost of employing that worker, thus guiding hiring decisions.

The other methods presented do not directly calculate the value of the marginal product. Summing total output gives a general overview but does not isolate the contribution of a single worker. Taking the average output doesn't provide insight into the value added by the next worker, and subtracting the cost of production from total revenue addresses profit calculations rather than the value of a marginal unit of input.