In a competitive labor market, how does a firm determine the optimal number of workers to hire in order to maximize profits?

In a competitive labor market, a firm determines the optimal number of workers to hire by looking at the relationship between the wage they pay and the additional output those workers can produce. The firm will hire workers until the cost of hiring one more worker, known as the wage, is equal to the additional revenue generated by that worker, called the marginal revenue product. For example, if a company pays $15 per hour to a worker and that worker produces goods worth $20 in that hour, it makes sense to hire that worker. However, if hiring another worker would only produce $10 worth of goods, the firm would not hire them, as they would lose money. By balancing these costs and benefits, the firm can maximize its profits by hiring the right number of workers.