If the MRPL is greater than the wage rate, and the supply of labor is horizontal, the firm will
A)hire more labor.
B)hire less labor.
C)increase the wage paid.
D)not change its employment or wage practices.

Question

Quizplus · Accepted Answer

If the MRPL (marginal revenue product of labor) is greater than the wage rate and the supply of labor is horizontal (perfectly elastic), it means that the firm can hire an unlimited number of workers without having to raise the wage rate. In this case, the firm will want to hire more labor because each additional unit of labor will generate more revenue than it costs in wages. Thus, the best choice is A, hire more labor.

If the MRPL Is Greater Than the Wage Rate, and the Supply