Which statement is TRUE? A)If W VMPL,the firm should hire more labor. C)If W = VMPL,the firm should hire more labor. D)If W 0,the firm should shut down.

Question

Which statement is TRUE?
A)If W < VMPL,the firm should hire more labor.
B)If W > VMPL,the firm should hire more labor.
C)If W = VMPL,the firm should hire more labor.
D)If W > 0,the firm should shut down.

Quizplus · Accepted Answer

The correct statement is "If W < VMPL, the firm should hire more labor." VMPL (or Marginal Revenue Product of Labor) is the additional revenue generated by each unit of labor. In order to maximize profit, a firm should continue to hire labor as long as the wage rate (W) is less than the VMPL. This means that the revenue generated by the extra worker is greater than the cost of hiring the worker. Therefore, the firm should hire more labor as long as W < VMPL.

Which Statement Is TRUE