When a competitive firm maximizes profit, it will hire workers up to the point where the
A)marginal product of labor is equal to the product price.
B)marginal product of labor is equal to the wage.
C)value of the marginal product of labor is equal to the product price.
D)value of the marginal product of labor is equal to the wage.

Question

Quizplus · Accepted Answer

When a competitive firm maximizes profit, it hires workers up to the point where the value of the marginal product of labor equals the wage. This is because the value of the marginal product of labor is the additional revenue generated by each additional unit of labor, and the wage is the cost of each additional unit of labor. Thus, maximizing profit requires hiring workers up to the point where the additional revenue generated by each worker is just equal to their cost. Choice D correctly reflects this principle.

When a Competitive Firm Maximizes Profit, It Will Hire Workers