A profit-maximizing firm will hire labour until _____ equals the _______?
Correct answer: D. marginal cost of labor, marginal revenue product
- A. marginal revenue, marginal cost
- B. long run marginal revenue, long run marginal cost
- C. labor output ratio, capital output ratio
- D. marginal cost of labor, marginal revenue product
Explanation
A profit-maximizing firm hires labour up to the point where the extra cost of one more worker equals the extra revenue that worker generates. This condition is marginal cost of labour equal to marginal revenue product.
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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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