Which of the following statements 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 of the following statements 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

If the wage (W) is less than the value of the marginal product of labor (VMPL), the firm can increase its profit by hiring more labor, as the additional revenue generated by the labor exceeds the cost of hiring it.

Which of the Following Statements Is True