If a profit-maximizing firm hires an additional unit of labor, what must be true about labor's wage and marginal revenue product?
A) Its wage always equals its marginal revenue product.
B) Its wage is always greater than its marginal revenue product.
C) Its wage is always total revenue minus marginal revenue product.
D) Its wage is always less than or equal to its marginal revenue product.

Question

Quizplus · Accepted Answer

A profit-maximizing firm will hire additional labor as long as the wage is less than or equal to the marginal revenue product of labor, ensuring that the cost of hiring is justified by the revenue generated.

If a Profit-Maximizing Firm Hires an Additional Unit of Labor