Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
A firm should hire workers until the Marginal Revenue Product of Labor (MRPL) equals the wage rate.
B
Profit maximization occurs when the total output produced by all workers is at its highest level.
C
A firm will continue hiring additional workers as long as the MRPL exceeds the Marginal Factor Cost (MFC).
D
Increasing the wage rate will always lead to a decrease in the number of workers hired.
E
Firms in a perfectly competitive market can sell all their output at the market price.
Understanding the Answer
Let's break down why this is correct
Answer
In labor markets, profit maximization occurs when a company hires workers up to the point where the cost of hiring an additional worker equals the additional revenue that worker generates. This means that businesses need to consider how much they pay their employees compared to how much money those employees help bring in. For example, if a company pays a worker $20 an hour and that worker helps generate $25 an hour in sales, hiring more workers can increase profits. However, if the cost of hiring exceeds the revenue they bring in, the company should stop hiring. Therefore, companies must carefully analyze these costs and benefits to ensure they maximize their profits.
Detailed Explanation
Other options are incorrect because This idea suggests that hiring stops when the extra money made from a worker equals their pay; This statement implies that profit is highest when total output is at its peak.
Key Concepts
Profit Maximization
Marginal Revenue Product of Labor
Labor Supply and Demand
Topic
Profit Maximization in Labor Markets
Difficulty
easy level question
Cognitive Level
understand
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