If MRP_L = W, then the firm: A) should hire more labor. B) should reduce the amount of labor it uses. C) should not change the amount of labor it uses, since the amount is optimal now. D) should reconsider how much capital it uses.

Question

Quizplus · Accepted Answer

The equation MRP_L = W suggests that the marginal revenue product of labor (MRPL) equals the wage rate (W), indicating that the firm is optimizing its use of labor by hiring until the value of the marginal product of the last worker hired equals the wage paid. This means the firm is at an optimal point and should not change the amount of labor it uses.

If MRPL = W, Then the Firm

If MRP_L = W, Then the Firm