The profit-maximizing quantity of labor equates the marginal product of labor with
A) total factor productivity.
B) the marginal product of capital.
C) the real wage.
D) the average product of labor.

Question

Quizplus · Accepted Answer

The profit-maximizing quantity of labor equates the marginal product of labor with the real wage, which is the price of one unit of labor. At this point, the firm is producing at the point where the last unit of labor hired earns the same revenue as its cost (the real wage). Hiring more or less labor at this point would result in lower profits for the firm.

The Profit-Maximizing Quantity of Labor Equates the Marginal Product of Labor