A firm has hired the profit-maximizing number of workers when the wage is:
A) less than the price of the product.
B) greater than the average product of the last worker hired.
C) equal to the average product of the last worker hired.
D) equal to the value of the marginal product of labour of the last worker hired.

Question

Quizplus · Accepted Answer

When a firm hires workers up to the point where the marginal revenue product (MRP) of labor equals the wage rate, it maximizes profits. MRP is the value produced by each additional unit of labor, and if the wage rate is equal to the MRP of the last worker hired, then hiring any more workers would result in lower profits due to the diminishing marginal returns of labor.

A Firm Has Hired the Profit-Maximizing Number of Workers When