What does the marginal product of labor (MRP) measure?

The marginal product of labor (MRP) specifically calculates the additional revenue generated by employing one more unit of labor, holding all other inputs constant. This concept is critical in determining how much value an additional worker can add to production and, consequently, to overall revenue.

When a firm hires an additional worker, the MRP helps assess whether the cost of hiring that worker is justified by the revenue they will produce. If the MRP is higher than the wage paid to that worker, it makes economic sense for the firm to hire more labor. Thus, this measure directly informs the firm's labor demand decisions based on the contribution of each additional worker to the firm's output and profitability.

Other options do not encompass this direct relationship between labor employment and revenue generation; for instance, total output measures the overall production volume, labor costs relate to expenditure rather than revenue, and overall efficiency does not specifically tackle the incremental impact of labor on revenue. Hence, the correct answer effectively captures the essence of how additional labor influences a firm's financial performance.