In a perfectly competitive labor market, what determines the optimal number of workers a firm should hire?

In a perfectly competitive labor market, the optimal number of workers a firm should hire is determined by the point where the additional revenue generated by hiring one more worker equals the additional cost of that worker's wages. This concept is known as the marginal revenue product of labor. For example, if a company produces toys and finds that hiring one more worker increases toy production and sales enough to cover their salary, they will hire that worker. However, if hiring an additional worker does not lead to enough extra sales to justify the wage, the firm will choose not to hire. Therefore, firms balance the benefits of hiring against the costs to decide how many workers to employ.