In order to achieve highest possible level of profit, the typical firm in the economy should
A) stop hiring labor when the extra profit from selling the output produced by the last worker hired just equals the value of the last worker's wage.
B) stop hiring labor when the extra revenue from selling the output produced by the last worker hired just equals the value of the last worker's wage.
C) stop hiring labor when the extra price from selling the output produced by the last worker hired just equals the value of the last worker's wage.
D) stop hiring labor when the extra revenue from selling the output produced by the last worker hired becomes less than the value of the last worker's wage.

Question

Quizplus · Accepted Answer

The principle of profit maximization for firms involves hiring labor up to the point where the marginal revenue product (MRP) of labor equals the wage rate. The MRP is the additional revenue a firm earns from hiring one more unit of labor, which aligns with choice B's description of stopping hiring when the extra revenue from the last worker equals their wage.

In Order to Achieve Highest Possible Level of Profit, the Typical