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Define the term Marginal Revenue Productivity (MRP) of a factor of production - Leaving Cert Economics - Question 3 - 2011
Question 3
Define the term Marginal Revenue Productivity (MRP) of a factor of production. State and explain two factors that can influence MRP. Outline two difficulties that ... show full transcript
Worked Solution & Example Answer:Define the term Marginal Revenue Productivity (MRP) of a factor of production - Leaving Cert Economics - Question 3 - 2011
Step 1
Define the term Marginal Revenue Productivity (MRP) of a factor of production.
Answer
Marginal Revenue Productivity (MRP) is defined as the additional revenue generated from employing one more unit of a factor of production, holding all other factors constant. It is the extra income produced when one additional unit of input, such as labor or capital, is utilized in the production process.
Step 2
State and explain two factors that can influence MRP.
Answer
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The productivity/commitment of the factor: The more productive or committed a worker is, the higher their MRP will be, as they are likely to produce more output.
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The selling price of the output: If the market price of the goods produced increases, then the MRP will also rise, as each unit of output sold fetches a higher price.
Step 3
Outline two difficulties that may arise in measuring MRP.
Answer
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Not all factors produce measurable output: In situations like public services, where output is not sold in a direct market, it becomes challenging to quantify MRP accurately.
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Combining capital and labor to produce additional output: It may be difficult to isolate the contribution of each factor when both are used together in production, making MRP measurement complex.
Step 4
State and explain three reasons why investment is important for the Irish economy.
Answer
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Increased productive capacity: Investment enhances the economy's capacity to produce goods and services efficiently, replacing outdated capital and enabling better productivity.
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Increased labor productivity: With more investment, workers can utilize improved tools and technology, leading to more efficient output, thus increasing overall productivity.
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Increased employment: As investments grow, the demand for labor rises, resulting in job creation and a consequent boost in economic activity.
Step 5
Describe three factors that currently influence the level of investment in the Irish economy.
Answer
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Rates of interest/cost of borrowing: High interest rates can deter investment as they reduce the profitability of borrowing.
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Business people's expectations: Business confidence impacts investment levels; if entrepreneurs are pessimistic about future economic conditions, they may choose not to invest.
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Government economic policies: Favorable policies, such as tax incentives and infrastructure development, can stimulate investment by creating a conducive environment.
Step 6
Advise the Minister for Transport on two possible economic advantages and two possible economic disadvantages of investing in public transport, rather than investing in the construction of new roads.
Answer
Possible economic advantages:
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Better use of scarce resources: Public transport can be more efficient and reduce the dependency on road infrastructure.
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Improved public infrastructure/regional development: Investment in public transport systems opens up new areas and can enhance accessibility for various regions.
Possible economic disadvantages:
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Investment may be costlier than investment in roads: The initial setup and maintenance of public transport systems can incur higher costs.
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People in rural areas disadvantaged: If public transport gets limited investments, those in remote areas may have lesser access compared to road networks.