If the market wage is below the marginal revenue product of labor,then _____
A)a profit-maximizing firm will employ more workers.
B)a profit-maximizing firm will employ fewer workers.
C)there is an increase in the demand for labor.
D)there is a decrease in the demand for labor.
E)the opportunity cost of leisure increases.

Question

Quizplus · Accepted Answer

When the market wage is below the marginal revenue product of labor, it means that each additional worker is adding more to the firm's revenue than it costs to employ them. Therefore, a profit-maximizing firm will employ more workers to take advantage of the additional profit that each worker brings.

If the Market Wage Is Below the Marginal Revenue Product