A firm should hire more workers to increase its profits if
A)the marginal product of labour is greater than the wage the firm will pay these workers.
B)the wage rate is less than the marginal revenue product of labour.
C)there is enough capital and other resources for the workers to use.
D)the demand for labour is elastic.

Question

Quizplus · Accepted Answer

Hiring more workers will increase the firm's profits if the wage rate is less than the marginal revenue product of labour. This means that the revenue generated by an additional worker is greater than the wage paid to that worker. It is the profit-maximizing point where the cost of hiring an additional worker is less than the revenue generated by that worker. The other options, such as the marginal product of labour and demand for labour, are important factors to consider but they do not necessarily indicate whether hiring more workers will lead to profit maximization.

A Firm Should Hire More Workers to Increase Its Profits