If the marginal product of labor is always positive, the total revenue will grow with each additional worker. Firms do not continuously hire new workers because:

Question

Quizplus · Accepted Answer

Firms stop hiring new workers when the marginal revenue product (MRP) is equal to the wage rate. Beyond this point, the cost of hiring an additional worker would exceed the additional revenue generated by that worker, resulting in a decrease in profits. This is the point of profit maximization for the firm. Therefore, options A and B are irrelevant, and wages do not have to necessarily increase with each new worker, only until the MRP equals the wage rate.

If the Marginal Product of Labor Is Always Positive, the Total