If a firm hires labour and with its current employees 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 increasing the wage rate.

Question

Quizplus · Accepted Answer

The equation W = VMPL represents the condition for profit maximization, where the wage paid to each worker is equal to their marginal product of labor (MPL) multiplied by the value of the firm's output (V). This is because firms will hire labor up to the point where the wage paid equals the additional revenue generated by each additional worker. Therefore, if the firm is already satisfying this condition, there is no way to increase profits by hiring more or less labor or by changing the wage rate. The only way to increase profit would be to increase the value of output or reduce costs in other areas.

If a Firm Hires Labour and with Its Current Employees