In the context of hiring, how does marginal productivity theory relate to labor market equilibrium and cost-benefit analysis when determining the optimal number of employees to hire?

Marginal productivity theory suggests that a business should hire employees until the cost of hiring one more worker is equal to the additional value that worker brings to the company. This is important for reaching labor market equilibrium, where the number of workers hired meets the company's needs without overspending. For example, if hiring an extra employee costs $50,000 a year and that employee generates $60,000 in profit, the company benefits by hiring them. In terms of cost-benefit analysis, businesses weigh the costs of salaries against the expected increase in productivity, ensuring they only hire when the benefits exceed the costs. By following this approach, companies can determine the optimal number of employees to hire while maximizing their profits.