If the marginal revenue product (MRP) of labor is less than the wage rate,
A) the firm is making profits.
B) the firm is incurring losses.
C) more labor should be employed.
D) less labor should be employed.

Question

Quizplus · Accepted Answer

If the MRP of labor is less than the wage rate, it means that the firm is paying more to its workers than what they are producing. Therefore, the firm is incurring losses and should reduce the amount of labor it employs to minimize its costs. This will help the firm to get back to profitability by balancing the wage rate and the MRP of labor.

If the Marginal Revenue Product (MRP) of Labor Is Less