A profit-maximizing firm would hire more employees if
A)marginal product of labour exceeds real wage.
B)marginal product of labour is less than real wage.
C)marginal revenue product of labour is less than real wage.
D)marginal revenue product of labour is less than nominal wage.

Question

Quizplus · Accepted Answer

A profit-maximizing firm would hire more employees as long as the marginal product of labor exceeds the real wage. This is because the marginal product of labor represents the additional output produced by each additional worker hired, while the real wage represents the cost of hiring each additional worker. As long as the additional output produced by each worker is greater than the cost of hiring them, the firm can increase profits by hiring more workers.

A Profit-Maximizing Firm Would Hire More Employees If