Firms use information on labor's marginal revenue product to determine

Question

Quizplus · Accepted Answer

Marginal revenue product (MRP) is the additional revenue that a firm gains by hiring one additional unit of labor. As a firm maximizes its profits by hiring labor up to the point where the MRP is equal to the wage rate, firms use information on labor's MRP to determine how many workers to hire at each wage rate. Therefore, option B is the best choice. Options A, C, and D are incorrect because they do not reflect the primary purpose of using information on labor's MRP, i.e., to determine the optimal quantity of labor to hire at each wage rate.

Firms Use Information on Labor's Marginal Revenue Product to Determine