A profit-maximizing firm will hire the variable input, labor, until the point where: Group of answer choices marginal product of

Question

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A profit-maximizing firm will hire the variable input, labor, until the point where: Group of answer choices marginal product of

labor is equal to the marginal revenue product of capital. marginal revenue from each unit of output is equal to the wage rate. marginal revenue product of labor is equal to the marginal cost of labor. marginal revenue product of labor is equal to zero. marginal product of labor equals the marginal revenue from each unit of output.

Business

1 answer:

zysi [14] · Answer 1 · 2022-02-26T23:19:22+03:00

Answer:

marginal revenue product of labor is equal to the marginal cost of labor.

Explanation:

In a competitive capitalist economy, firms adopt their strategy of maximizing profit by producing on the scale where marginal revenue (price) equals marginal cost (cost of producing one more unit). The same applies to the rationalization of productive inputs, such as labor. The firm will adopt the amount of production-maximizing labor in which marginal labor productivity (how much more worker produces) equals marginal labor cost (cost of hiring an extra worker). As long as marginal labor productivity is higher than marginal labor cost, the firm has hired. The moment these accounting identities match, the firm will stop contracting because this is the point of maximum productivity that will be able to maximize profit.