A competitive employer should hire additional labor as long as:
A) the MRP exceeds the wage rate.
B) the wage rate is less than MP.
C) average product exceeds MP.
D) MC exceeds MR.

Question

Quizplus · Accepted Answer

A competitive employer should hire additional labor as long as the marginal revenue product (MRP) exceeds the wage rate. This means that the additional revenue generated by the new worker should be greater than the cost of hiring them (the wage rate). If MRP is less than the wage rate, then hiring more workers would result in a loss for the employer. B is incorrect because MP (marginal product) is not directly relevant to hiring decisions. C is also incorrect because average product is not a good measure of productivity for an individual worker. D is irrelevant to the question of whether to hire additional labor.

A Competitive Employer Should Hire Additional Labor as Long As