An employer hiring in a competitive labor market should hire additional labor as long as
A) the MRP exceeds the wage rate.
B) the wage rate is less than MP.
C) average product exceeds MP.
D) MC exceeds MR.

Question

Quizplus · Accepted Answer

In a competitive labor market, the employer should hire additional labor as long as the marginal revenue product (MRP) of labor exceeds the wage rate. This is because the MRP represents the additional revenue generated by hiring an additional unit of labor, while the wage rate is the cost of hiring that additional unit of labor. By hiring until MRP = wage rate, the employer optimizes their profit-maximizing level of employment.

An Employer Hiring in a Competitive Labor Market Should Hire