The general rule for hiring any input (say, labor)in the profit-maximizing amount is MRC = MRP. This rule takes the special form W = MRP (where W is the wage rate)when the
A)labor supply curve is upsloping.
B)supply of labor is inelastic.
C)firm is hiring labor under purely competitive conditions.
D)firm is hiring labor under imperfectly competitive conditions.

Question

Quizplus · Accepted Answer

Under purely competitive conditions, firms are price takers, including for wages (W), which means they adjust their hiring until the wage rate equals the marginal revenue product (MRP) of labor. This ensures profit maximization by equating the cost of hiring an additional unit of labor (W) with the additional revenue generated by that unit (MRP).

The General Rule for Hiring Any Input (Say, Labor)in the Profit-Maximizing