If MRP_L MFC_L, the firm should hire more labor.

Name: If MRP L > MFC L , the firm should hire more labor.
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Question

If MRP_L > MFC_L, the firm should hire more labor.

Quizplus · Accepted Answer

If MRP_L is greater than MFC_L, it indicates that the marginal revenue product of labor (MRP) is higher than the marginal factor cost of labor (MFC). This suggests that the firm is gaining more revenue from each additional unit of labor than it is paying in additional labor costs. Thus, it would make sense for the firm to hire more labor to increase productivity and profitability.

If MRPL > MFCL, the Firm Should Hire More Labor

If MRP_L > MFC_L, the Firm Should Hire More Labor