Labor is a firm's only variable input. The firm should hire additional units of labor as long as the wage is less than or equal to the marginal revenue product of that additional unit of labor.

Question

Quizplus · Accepted Answer

The firm should continue hiring additional units of labor as long as the wage (cost of hiring an additional unit of labor) is less than or equal to the marginal revenue product (additional revenue generated by hiring an additional unit of labor), as this indicates that the additional labor is still contributing positively to the firm's profit.

Labor Is a Firm's Only Variable Input