If the marginal cost of labour exceeds the marginal revenue product of labour, then profit maximisation implies that the firm should employ more workers.

Question

Quizplus · Accepted Answer

For profit maximisation, a firm should employ workers up to the point where the marginal cost of labour equals the marginal revenue product of labour. If the marginal cost exceeds the marginal revenue product, employing more workers would decrease profits.

If the Marginal Cost of Labour Exceeds the Marginal Revenue