Which statement is TRUE? A) If W VMPL,the firm should hire more labour. C) If W = VMPL,the firm should hire more labour. D) If W 0,the firm should shut down.

Question

Which statement is TRUE?
A) If W < VMPL,the firm should hire more labour.
B) If W > VMPL,the firm should hire more labour.
C) If W = VMPL,the firm should hire more labour.
D) If W > 0,the firm should shut down.

Quizplus · Accepted Answer

If W (wage rate) is less than VMPL (value of marginal product of labor), it means that the firm is not paying its workers their marginal contribution to the firm's revenue. This implies that the marginal benefit of hiring additional labor is higher than the marginal cost (wage rate), and the firm should hire more labor to increase its profits.

Which Statement Is TRUE