A firm has hired the profit-maximizing number of workers when the wage is:
A)less than the price of the product.
B)greater than the average product of the last worker hired.
C)equal to the average product of the last worker hired.
D)equal to the value of the marginal product of labor of the last worker hired.

Question

Quizplus · Accepted Answer

The profit-maximizing number of workers occurs when the value of the marginal product of labor is equal to the wage. This is because if the wage is lower than the value of the marginal product of labor, hiring an additional worker would increase profits. On the other hand, if the wage is higher than the value of the marginal product of labor, the cost of hiring an additional worker would exceed the additional revenue they generate, leading to a reduction in profits. Therefore, the firm hires the profit-maximizing number of workers when the wage is equal to the value of the marginal product of labor of the last worker hired.

A Firm Has Hired the Profit-Maximizing Number of Workers When