If a firm hires labor and with its current employees 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 increasing the wage rate.

Question

Quizplus · Accepted Answer

The firm is already maximizing its profit by hiring labor up to the point where the wage equals the value of the marginal product of labor. Any deviation from this point would result in a decrease in profit. Therefore, hiring less labor (B) or increasing the wage rate (D) would lead to a decrease in profit, while hiring more labor (C) would not make sense as the additional labor would not generate enough value to compensate for the wage paid.

If a Firm Hires Labor and with Its Current Employees