Question

Firms will hire additional workers as long as the nominal wage: A. is less than the marginal product of labor. B. equals the marginal product of labor. C. is greater than the marginal product of labor. D. is less than the value of the marginal product of labor.

Answer 1

Answer:

D) is less than the value of the marginal product of labor.

Explanation:

As an economic principle, firms will maximize their profits when the marginal revenue they receive for selling a good or service equals the marginal costs of producing and selling that good or service.

The marginal product of labor equals the change in total output gained from adding one extra unit of labor. It basically measures how much value is added by each additional unit of labor. So a firm will hire additional workers as long as the revenue generated from their work is higher than their wage.