A profit-maximizing firm hires labor up to the point where
A) price of the product equals the value of marginal product.
B) price of the product equals the wage rate.
C) the wage rate multiplied by the quantity of labor equals the marginal product.
D) the wage rate equals the value of marginal product.
E) marginal revenue equals the wage rate.

Question

Quizplus · Accepted Answer

The profit-maximizing firm hires labor up to the point where the wage rate equals the value of marginal product. This is because at this point, the additional revenue generated by hiring one more unit of labor is exactly offset by the additional cost of that unit of labor, and any further increase in labor would lead to a decline in profits.

A Profit-Maximizing Firm Hires Labor Up to the Point Where