A firm in a perfectly competitive goods and labor market produces a good that sells for $3. If the competitive wage is $12, then the firm will keep hiring workers until the marginal product is equal to:

Question

Quizplus · Accepted Answer

In a perfectly competitive market, a firm will hire workers until the value of the marginal product (VMP) equals the wage rate. The VMP is calculated as the price of the good multiplied by the marginal product (MP) of labor. Given that the price of the good is $3 and the wage rate is $12, the firm will keep hiring workers until the marginal product (MP) is equal to $12/$3 = 4.

A Firm in a Perfectly Competitive Goods and Labor Market