Which of the following statements is TRUE? A) If W VMPL, the firm should hire more labor. C) If W = VMPL, the firm should hire more labor. D) If W 0, the firm should shut down.

Question

Which of the following statements is TRUE?
A) If W < VMPL, the firm should hire more labor.
B) If W > VMPL, the firm should hire more labor.
C) If W = VMPL, the firm should hire more labor.
D) If W > 0, the firm should shut down.

Quizplus · Accepted Answer

If W < VMPL (Wage is less than the Value of the Marginal Product of Labor), the firm should hire more labor because the additional revenue generated by hiring an extra worker exceeds the cost of hiring that worker.

Which of the Following Statements Is TRUE