When is it not in the best interest of a company to hire additional workers in the short run?
A)when the average product of labor is decreasing
B)when the firm is in Stage II of the production process
C)when the marginal revenue product equals zero
D)when the wage rate is equal to or greater than labor's marginal revenue product

Question

Quizplus · Accepted Answer

If the wage rate is equal to or greater than labor's marginal revenue product, hiring additional workers will result in a negative contribution to the firm's profits. This is because the cost of hiring an additional worker (i.e. the wage rate) will be greater than the revenue generated by their work (i.e. their marginal revenue product). Therefore, it is not in the best interest of the company to hire additional workers in the short run under these circumstances.

When Is It Not in the Best Interest of a Company