A profit-maximizing firm in a competitive market will continue to hire more workers when

Question

Quizplus · Accepted Answer

A profit-maximizing firm in a competitive market will continue to hire more workers as long as the marginal revenue product of the additional workers exceeds the marginal factor cost. Therefore, if the marginal factor cost is less than the marginal revenue product of the additional workers, it is profitable to hire more workers. Option A and B are incorrect because they suggest that the firm should stop hiring more workers when it reaches the point of equal or higher marginal factor cost than the marginal revenue product. Option D is incorrect because a negative marginal factor cost does not make sense in this context.

A Profit-Maximizing Firm in a Competitive Market Will Continue to Hire