A profit-maximizing firm will hire labor as long as the marginal revenue product of labor is less than the wage.

Question

Quizplus · Accepted Answer

The profit-maximizing firm will hire labor up to the point where the marginal revenue product of labor is equal to the wage. If the marginal revenue product of labor is less than the wage, it means that the cost of hiring an additional unit of labor is higher than the additional revenue generated by that labor, leading to a decrease in profits. Thus, the firm will stop hiring labor before reaching that point.

A Profit-Maximizing Firm Will Hire Labor as Long as the Marginal