Profit maximization implies that firms will want to ________.
A)accumulate labor while the MPL is greater than the real wage
B)accumulate capital while the MPK is lower than the rental price of capital
C)accumulate labor while the MPK is greater than the rental price of capital
D)accumulate capital while the MPL is greater than the real wage
E)none of the above

Question

Quizplus · Accepted Answer

Profit maximization implies that firms will want to accumulate labor as long as the marginal product of labor (MPL) is greater than the real wage, because this indicates that the additional output produced by the last unit of labor hired is more valuable than the cost of hiring that labor.

Profit Maximization Implies That Firms Will Want to ________