If the MRP of labor is below the wage rate, the firm should lay off workers.

Question

Quizplus · Accepted Answer

If the MRP of labor is below the wage rate, it does not necessarily mean that the firm should lay off workers. The firm may still continue to employ workers as long as they generate a positive contribution margin. However, the firm may consider reducing the wage rate or finding ways to increase the MRP of the labor in order to improve profitability.

If the MRP of Labor Is Below the Wage Rate