The rule for maximizing profit is to hire labor up to the point at which the value of marginal product
A) equals the wage rate.
B) is greater than the wage rate.
C) is less than the wage rate.
D) is a mirror image of the wage rate.
E) equals the price of the product produced.

Question

Quizplus · Accepted Answer

Hiring labor up to the point where the value of the marginal product equals the wage rate ensures that the cost of hiring an additional unit of labor is exactly matched by the additional output generated by that unit of labor. This maximizes profits because any additional labor beyond that point would increase costs more than revenue.

The Rule for Maximizing Profit Is to Hire Labor Up