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This question is about employer.
How to calculate marginal revenue product
To calculate the marginal revenue product, you need to divide the change of additional revenue by the change in quantity. Marginal revenue product is any additional revenue that is generated because of an increasing factor in production so additional revenue is the change of additional revenue in the formula.
Increasing the factor of production can include adding more employees, new machinery, or even new locations. All of these factors cost money, so it is important that a company can calculate whether or not that additional money is worthwhile. Calculating marginal revenue product is crucial for this.
Marginal revenue helps you to discover how much additional money is made when one product is sold. You can figure out how much more money any additional factors of production give your company by calculating marginal revenue.
For example, say you made $1000 more dollars by selling 20 more products. This tells you that you make $50 each time you sell a new product. If the factoring cost only adds $2 per product sold, that means that you make an additional $48, which makes it extremely worthwhile.
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