A firm finds that it must increase wages to attract extra workers. The firm will hire labor up to the point where the marginal
A) product of labor equals the wage rate.
B) revenue product of labor is greater than the wage rate.
C) revenue product of labor starts to decline.
D) revenue product equals the additional cost of hiring an extra worker.

Question

Quizplus · Accepted Answer

A firm will hire labor up to the point where the marginal revenue product (MRP) equals the marginal cost of hiring an extra worker, which is the wage rate. This ensures that the cost of hiring an additional worker is justified by the revenue generated by that worker.

A Firm Finds That It Must Increase Wages to Attract