A profit-maximizing firm following the marginal decision rule will:

Question

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The marginal decision rule states that a profit-maximizing firm should hire labor up to the point where the marginal revenue product (MRP) of labor is equal to the marginal factor cost (MFC) of labor. This is because at this point, the firm is able to maximize its profits by adding one more unit of labor to its production process. If the MRP is greater than the MFC, the firm should hire more labor, while if the MRP is less than the MFC, the firm should hire less labor. However, if the MRP equals zero, the firm should not hire any labor as it cannot generate any revenue from doing so.

A Profit-Maximizing Firm Following the Marginal Decision Rule Will