Suppose the MRP of a firm's 12th worker is $22 and the worker's marginal wage cost is $16. We can say with certainty that the firm
A) is hiring labor in a competitive labor market at a wage rate of $16.
B) is hiring labor in a monopsonistic labor market.
C) will find it profitable to hire fewer workers.
D) will find it profitable to hire more workers.

Question

Quizplus · Accepted Answer

The firm will find it profitable to hire more workers because the marginal revenue product (MRP) of the 12th worker ($22) is greater than the marginal wage cost ($16), indicating that the additional worker adds more to revenue than to cost.

Suppose the MRP of a Firm's 12th Worker Is $22