If MFC MRPL, the firm should

Question

If MFC > MRPL, the firm should

Quizplus · Accepted Answer

If MFC (marginal factor cost) is greater than MRPL (marginal revenue product of labor), it means that the cost of hiring an additional worker exceeds the additional revenue that the worker can generate. In other words, the firm is experiencing diminishing marginal returns to labor. The best option for the firm in this case would be to reduce the number of workers to achieve a better balance between costs and productivity. Therefore, choice D (reduce the number of workers) is the best option.

If MFC > MRPL, the Firm Should