A competitive firm should continue to hire workers until the MRP is equal to
A)Demand.
B)The number of workers hired.
C)The market wage rate.
D)Zero.

Question

Quizplus · Accepted Answer

A competitive firm should continue to hire workers until the marginal revenue product (MRP) is equal to the market wage rate. This is because the MRP represents the additional revenue generated by hiring an additional worker, while the wage rate represents the additional cost of hiring that worker. At the point where MRP equals the wage rate, the firm has found the optimal level of employment where the additional revenue generated is equal to the additional cost incurred. Choosing any of the other options would not result in an optimal allocation of labor resources.

A Competitive Firm Should Continue to Hire Workers Until the MRP