A competitive profit-maximizing firm should hire workers up to the point where ?
Correct answer: C. the value of the marginal product of labor equals the wage
- A. the wage, the rental price of capital and the rental price of land are all equal
- B. the marginal product of labor equals zero and the production function is maximized
- C. the value of the marginal product of labor equals the wage
- D. the marginal product of labor equals the wage
Explanation
A profit-maximizing firm hires labor while the value of the marginal product of labor exceeds the wage. It stops at the point where the value of marginal product equals the wage.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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