Which of the following expresses the correct decision-making rule for a profit-maximizing firm hiring units of labor?
A) If the MRP was rising, less labor would be employed as time passed.
B) The firm should continue to hire workers as long as their MRP is greater than the wage rate.
C) The firm should continue to hire workers until the total costs of all workers equals the total revenue from the output of the workers.
D) The firm should continue to hire workers until the wage rate equals the price of the product.

Question

Quizplus · Accepted Answer

A profit-maximizing firm will hire units of labor until the point where the value of the marginal product (MRP) of labor equals the wage rate. Beyond that point, the additional cost of hiring more labor will exceed the additional revenue generated by their output. Therefore, the correct decision-making rule is to continue to hire workers as long as their MRP is greater than the wage rate, as stated in choice B.

Which of the Following Expresses the Correct Decision-Making Rule for a Profit-Maximizing