The marginal productivity principle says that a profit-maximizing firm should
A) hire capital until its marginal product is zero.
B) hire labor until another worker costs more to hire than he can earn for the firm.
C) hire the quantities of capital and of labor at which their marginal products are equal.
D) hire capital until its marginal product is negative.

Question

Quizplus · Accepted Answer

The marginal productivity principle states that a firm should hire labor until the cost of hiring an additional worker equals the revenue generated by that worker, ensuring that the firm maximizes profit.

The Marginal Productivity Principle Says That a Profit-Maximizing Firm Should