Question

Competitive firms hire workers until the additional benefit they receive from the last worker hired is equal to(i)the additional cost of that worker.(ii)the wage paid to that worker.(iii)the marginal product of that worker.a. (iii) onlyb. (i) and (ii)c. (i) onlyd. (ii) and (iii)

Answer 1

Answer:

The correct answer to the following question is option B) both statements i and ii are correct.

Explanation:

First of all the marginal product can be defined as the additional unit of product that a business can produce by using additional unit of input. And marginal revenue product refers to the change that occurs in the total revenue due to the production of additional unit of product.

Any competitive firm would hire additional workers only when the MRPL (marginal revenue product of labor) is greater than the wages paid to that labor and additional cost incurred in hiring those workers and they would stop hiring the workers when the MRPL is equal to the cost paid to the workers.