A firm in a competitive labor market will be willing to pay a wage rate equal to the additional revenue resulting from production when the last worker is hired.

Question

Quizplus · Accepted Answer

In a competitive labor market, a firm will pay a wage rate equal to the marginal revenue product of labor, which is the additional revenue the firm earns from hiring the last worker. This ensures that the firm is maximizing its profits by equating the cost of hiring an additional worker (the wage rate) to the revenue generated by that worker.

A Firm in a Competitive Labor Market Will Be Willing