The marginal productivity principle says that a profit-maximizing firm should
A)hire capital until its marginal product is zero.
B)hire labor until another worker costs more to hire than he or she can earn for the firm.
C)hire the quantities of capital and of labor at which their marginal products are equal.
D)hire capital until its marginal product is negative.

Question

Quizplus · Accepted Answer

The marginal productivity principle suggests that a firm should continue to hire labor until the cost of hiring an additional worker is equal to the revenue generated by that worker. This is because, at this point, hiring more workers would not increase profits. Choices A, C, and D do not accurately reflect this principle.

The Marginal Productivity Principle Says That a Profit-Maximizing Firm Should