If hiring an extra worker increases a factory's output from 1000 to 1200 units per day, but to sell this higher output the factory must reduce the price of its product from Rs 25 to Rs 24 per unit, what is the marginal revenue product (MRP) of this last worker?

Introduction / Context:
Marginal revenue product (MRP) is a key concept in the theory of factor pricing. It measures the additional revenue earned by a firm when it employs one more unit of a factor such as labour, taking into account any change in output and any necessary change in price to sell that extra output. This question provides data on both the change in quantity produced and the price adjustment required to sell the new output, testing whether the learner can compute the MRP correctly.

Given Data / Assumptions:
- Initial output: 1000 units per day.
- New output after hiring extra worker: 1200 units per day.
- Initial price per unit: Rs 25.
- New price needed to sell 1200 units: Rs 24 per unit.
- Other conditions are assumed unchanged, and all units are sold at the same price on each side of the change.

Concept / Approach:
Marginal revenue product is calculated as the change in total revenue resulting from employing one more unit of the factor. Total revenue (TR) is price times quantity. Therefore, we first compute TR before hiring the additional worker, then compute TR after hiring the worker and adjusting the price, and finally take the difference between the two totals. That difference is the MRP of the additional worker. It is important to use the new price for all units after the change, since the firm must lower the price on the entire output to sell the larger quantity.

Step-by-Step Solution:
Step 1: Calculate initial total revenue. Before hiring the extra worker, output is 1000 units and price is Rs 25 per unit. Initial TR = 1000 * 25 = Rs 25000. Step 2: Calculate new total revenue. After hiring the extra worker, output is 1200 units and price is reduced to Rs 24 per unit. New TR = 1200 * 24 = Rs 28800. Step 3: Compute the change in total revenue, which equals the marginal revenue product of the new worker. MRP = new TR - initial TR = 28800 - 25000 = Rs 3800. Step 4: Therefore, the marginal revenue product of the extra worker is Rs 3800.

Verification / Alternative check:
To double check, note that the worker adds 200 units of output (from 1000 to 1200), but the price for all units must drop by Rs 1 (from 25 to 24). The gain in revenue from the extra 200 units at Rs 24 each is 200 * 24 = Rs 4800. However, the loss from reducing the price on the original 1000 units is 1000 * 1 = Rs 1000. Net change in revenue = gain 4800 minus loss 1000 = Rs 3800. This matches the previous calculation, confirming that the MRP is correctly computed.

Why Other Options Are Wrong:
Rs 200 is wrong because it considers only the direct output gain without correctly incorporating the price reduction effect on all units, or it may come from a miscalculation of net revenue change.
Rs 4000 is wrong because it might result from multiplying the extra 200 units by the old price of Rs 20 or some similar error, ignoring the necessary price reduction.
Rs 100 is wrong because it does not relate meaningfully to the change in total revenue due to the extra worker when both quantity and price are changing.

Common Pitfalls:
A frequent mistake is to calculate MRP as marginal physical product times the original price only, without considering that the firm must lower the price for all units to sell the increased quantity. This leads to overestimation. Another common error is to subtract only partial revenue changes instead of calculating total revenue before and after. To avoid these problems, always remember that MRP is defined as the change in total revenue due to employing one more unit of the factor, and that both quantity and price effects must be included when the demand curve is downward sloping.

Final Answer:
The marginal revenue product of the last worker is Rs 3800 per day.