Competitive firms that maximise profit will hire workers until the value of the marginal product:

Question

Quizplus · Accepted Answer

Competitive firms will hire workers until the value of the marginal product equals the wage. This is because hiring additional workers increases the total output (and therefore revenue) of the firm, but also increases the cost of paying wages. Hiring more workers will continue to increase revenue, but at a decreasing rate (i.e. the value of the marginal product will begin to fall). Therefore, it is rational for firms to stop hiring at the point where the value of the marginal product equals the wage, as any additional hiring will result in a cost that exceeds the additional revenue generated.

Competitive Firms That Maximise Profit Will Hire Workers Until the Value