If the wage is below the marginal revenue product, then a profit-maximizing firm will
A)employ more workers
B)employ fewer workers
C)see an increase in its demand for labor
D)see an increase in its supply of labor
E)see a fall in its demand for labor

Question

Quizplus · Accepted Answer

A profit-maximizing firm will employ more workers if the wage is below the marginal revenue product because it can increase its profits by hiring additional workers until the wage equals the marginal revenue product.

If the Wage Is Below the Marginal Revenue Product, Then