At the competitive firm's profit-maximizing quantity of labor:

Question

Quizplus · Accepted Answer

At the profit-maximizing quantity of labor, the value of the last worker's marginal product should be equal to the wage paid to the worker (which is the marginal cost of that input). If the marginal product is greater than or equal to the wage, the firm will hire more workers to increase profits. On the other hand, if the marginal product is less than the wage, the firm will not hire more workers because the additional cost of hiring would be greater than the additional revenue generated by the worker, leading to a decrease in profits. Therefore, statement A is correct. Statement B is incorrect because it implies that the firm is hiring workers even though their marginal product is less than their wage, which would not maximize profit. Statement C is incorrect because it implies that the firm always generates positive profits, which may not be true in all cases.

At the Competitive Firm's Profit-Maximizing Quantity of Labor