A firm in a purely competitive product market finds 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 equals the wage rate.
C) revenue product of labor starts to decline.
D) revenue product is less than the cost of hiring an extra worker.

Question

Quizplus · Accepted Answer

In a purely competitive market, a firm will hire labor up to the point where the marginal revenue product (MRP) of labor equals the wage rate, as this is where the firm maximizes profit by equating the additional revenue generated by the last worker hired to the additional cost of hiring that worker.

A Firm in a Purely Competitive Product Market Finds It