A competitive employer is using labor in such an amount that labor's MRP is $10 and its wage rate is $8. This firm
A) should hire more labor because this will increase profits.
B) should hire more labor, although this may either increase or decrease profits.
C) is currently hiring the profit-maximizing amount of labor.
D) is selling its product in an imperfectly competitive market.

Question

Quizplus · Accepted Answer

The firm should hire more labor because the marginal revenue product (MRP) of labor ($10) is greater than the wage rate ($8), indicating that hiring additional labor will increase profits.

A Competitive Employer Is Using Labor in Such an Amount