In the benchmark competitive case,the firm will expand the hiring of employees until the marginal revenue product is:
A)less than the market wage rate.
B)equal to the market wage rate.
C)greater than the market wage rate.
D)the square of the market wage rate.

Question

Quizplus · Accepted Answer

The benchmark competitive case assumes that the firm is a price taker, meaning it cannot influence the market wage rate. Therefore, the firm will hire employees until the point where the marginal revenue product (MRP) of labor equals the market wage rate. Beyond that point, the cost of hiring an additional worker will outweigh the additional revenue generated by that worker, resulting in a decrease in the firm's profits. Thus, the firm will expand its hiring of employees until MRP = wage rate, and no further. Therefore, option B is the correct answer.

In the Benchmark Competitive Case,the Firm Will Expand the Hiring