A competitive firm will hire workers up to the point at which the value of the marginal product of labor equals the

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A competitive firm will hire workers up to the point where the value of the marginal product of labor (the additional output produced by one more unit of labor) is equal to the wage. If the wage is higher than the value of the marginal product of labor, the firm would be paying more for an additional worker than the worker is contributing to production, resulting in a loss for the firm. If the wage is lower than the value of the marginal product of labor, the firm could increase profits by hiring more workers. Average total cost and average variable cost are not relevant in determining how many workers to hire, as they represent the cost per unit of output and the cost per unit of variable input, respectively. The price per unit of output is also not relevant, as it does not affect the decision to hire workers.

A Competitive Firm Will Hire Workers Up to the Point