The demand for labor is a derived demand.Employers hire workers until the
A)wage rate equals the average product of labor.
B)wage rate equals the marginal revenue product of labor.
C)last worker hired adds nothing to total output.
D)average product of labor is zero.

Question

Quizplus · Accepted Answer

The derived demand for labor means that the demand for labor is based on the demand for the product or service that the labor is producing. Employers are motivated to hire workers because they can produce goods or services to sell and make a profit. The optimal level of labor is reached when the wage rate equals the marginal revenue product of labor, which represents the additional revenue that is generated by hiring an additional worker. This occurs because hiring an additional worker increases the overall productivity of the company, and therefore increases the revenue that the company can generate. Therefore, answer B is correct.

The Demand for Labor Is a Derived Demand