If a firm hires labour such that W VMPL,then profit:
A) is maximized.
B) can be increased by hiring less labour.
C) can be increased by hiring more labour.
D) can be increased by decreasing the price of the output.

Question

If a firm hires labour such that W > VMPL,then profit:
A) is maximized.
B) can be increased by hiring less labour.
C) can be increased by hiring more labour.
D) can be increased by decreasing the price of the output.

Quizplus · Accepted Answer

If W > VMPL, it means that the cost of hiring an additional unit of labour (W) is greater than the extra revenue generated by that labour (VMPL). This implies that the firm is not operating at its profit-maximizing level of labour input, as hiring additional labour would reduce profit. Therefore, the firm could increase its profit by hiring less labour.

If a Firm Hires Labour Such That W > VMPL,then