If a firm hires labor such that W VMPL,then profit:
A)is maximized.
B)can be increased by hiring less labor.
C)can be increased by hiring more labor.
D)can be increased by decreasing the price of the output.

Question

If a firm hires labor such that W > VMPL,then profit:
A)is maximized.
B)can be increased by hiring less labor.
C)can be increased by hiring more labor.
D)can be increased by decreasing the price of the output.

Quizplus · Accepted Answer

If a firm hires labor such that W > VMPL (where W is the wage rate and VMPL is the value of the marginal product of labor), it means that the firm is paying more to hire an additional unit of labor than the extra revenue it will generate. As a result, the firm is operating at a suboptimal level and can increase its profits by hiring less labor until W = VMPL. Therefore, the correct choice is B.

If a Firm Hires Labor Such That W > VMPL,then