If, for a firm in a competitive labour market, the value of marginal product of the last worker hired is $24 and the wage rate is $25 then
A) the firm has hired the profit- maximising number of workers.
B) the firm is earning $1 of profit from this worker.
C) more workers should be hired.
D) the worker should be fired.

Question

Quizplus · Accepted Answer

The firm should not hire workers for whom the value of their marginal product is less than the wage rate, as this results in a loss. Since the value of the marginal product ($24) is less than the wage rate ($25), the firm is losing $1 for this worker, indicating that they have hired too many workers and should let this worker go to maximize profits.

If, for a Firm in a Competitive Labour Market, the Value