Suppose Cassie's Candles is a profit-maximizing competitive firm. Cassie sells hand-made candles for $10 each. She will pay an hourly wage of $20 so long as the marginal productivity of a worker equals or exceeds two candles per hour.

Question

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In a competitive market, a profit-maximizing firm will hire additional labor as long as the value of the marginal product of labor (VMPL) is equal to or greater than the wage rate. Here, if a worker produces at least two candles per hour, the value of their marginal product is $20 or more (2 candles * $10 per candle), which equals or exceeds the hourly wage of $20, making it profitable for Cassie to employ the worker.

Suppose Cassie's Candles Is a Profit-Maximizing Competitive Firm