When labor is a firm's only variable input in its production process,a profit-maximizing firm will continue to employ additional workers as long as:

Question

Quizplus · Accepted Answer

When labor is the only variable input, a profit-maximizing firm will continue to employ additional workers as long as the marginal revenue product of labor is greater than the marginal resource cost. This ensures that each additional unit of labor adds more to the revenue than it costs the firm. If the marginal revenue product of labor is less than the marginal resource cost, it means that each additional unit of labor costs more than the revenue it generates, leading to lower profits. Therefore, the profit-maximizing firm will stop hiring at that point.

When Labor Is a Firm's Only Variable Input in Its