When hiring labor,to maximize profit a firm hires labor
A) until the value of marginal product equals the wage rate.
B) if the workers are not unionized.
C) until the value of marginal product is less than the wage rate.
D) until the value of marginal product is greater than the wage rate.
E) until the value of marginal product equals the marginal revenue from hiring the worker.

Question

Quizplus · Accepted Answer

To maximize profit, a firm hires labor until the value of the marginal product (VMP) of labor equals the wage rate. This is because, at this point, the cost of hiring an additional unit of labor (the wage) is exactly balanced by the revenue generated by that unit of labor, ensuring that profit is maximized. Hiring beyond this point would mean the cost (wage) exceeds the benefit (VMP), reducing profit.

When Hiring Labor,to Maximize Profit a Firm Hires Labor