Because the value of marginal product diminishes as the quantity of labour employed increases, the _______ the wage rate, the _______ workers the firm hires.
A) higher; more
B) lower; more
C) lower; fewer
D) None of the above answers is correct because there is no relationship between the wage rate and the number of workers hired.

Question

Because the value of marginal product diminishes as the quantity of labour employed increases, the _______  the wage rate, the _______ workers the firm hires.
A) higher; more
B) lower; more
C) lower; fewer
D) None of the above answers is correct because there is no relationship between the wage rate and the number of workers hired.

Quizplus · Accepted Answer

The law of diminishing marginal returns implies that as more workers are hired, the additional output each worker contributes decreases. Therefore, if the wage rate is lower, it becomes more cost-effective for a firm to hire more workers, as the cost of hiring an additional worker is less than the value of the additional output they produce.

Because the Value of Marginal Product Diminishes as the Quantity