When a profit-maximizing firm makes a decision to employ a worker, what is that decision based on?

Question

Quizplus · Accepted Answer

A profit-maximizing firm will base its decision to employ a worker on the individual contribution that the worker makes to the profit of the firm. This is because the firm's goal is to maximize profits, and therefore it will only hire workers who can increase its profitability. The familial relationship between the employer and employee is unlikely to be a factor in the decision-making process, and total output produced by the firm and the average productivity of the labor force may only be relevant insofar as they relate to individual worker productivity.

When a Profit-Maximizing Firm Makes a Decision to Employ a Worker