If a firm's marginal revenue product of labor exceeds the marginal factor cost of hiring an additional worker, the firm will always increase its profit by hiring that worker.

When a firm hires an additional worker, it looks at how much extra money that worker can bring in, which is called the marginal revenue product of labor. If this amount is greater than what it costs to hire the worker, known as the marginal factor cost, it means the firm can make more money than it spends. For example, if hiring a new worker brings in $100 in sales, but costs only $80 in wages, the firm gains an extra $20 in profit. Therefore, when the marginal revenue product is higher than the marginal factor cost, the firm benefits financially by hiring that worker. This reasoning helps firms decide how many workers to hire to maximize their profits.