Firms will hire additional workers as long as the wage:Group of answer choicesis greater than the marginal product of labouris less than the marginal product of labourequals the marginal product of labouris less than the value of the marginal product of labour
Question
Firms will hire additional workers as long as the wage:Group of answer choicesis greater than the marginal product of labouris less than the marginal product of labourequals the marginal product of labouris less than the value of the marginal product of labour
Solution
Firms will hire additional workers as long as the wage is less than the value of the marginal product of labour. Here's a step-by-step explanation:
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The marginal product of labour (MPL) is the additional output that a firm gets from hiring one more worker, holding all other inputs constant.
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The value of the marginal product of labour (VMPL) is the additional revenue a firm gets from hiring one more worker. It's calculated by multiplying the MPL by the price of the output.
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Firms make hiring decisions based on the VMPL. If the VMPL is greater than the wage, the firm can increase its profit by hiring another worker. This is because the additional revenue it gets from the extra output produced by the new worker is greater than the cost of hiring that worker.
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On the other hand, if the VMPL is less than the wage, the firm would lose money by hiring another worker. This is because the cost of hiring the worker is greater than the additional revenue from the extra output.
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Therefore, firms will hire additional workers as long as the wage is less than the VMPL. Once the wage equals the VMPL, the firm has no incentive to hire more workers, as doing so would not increase its profit.
Similar Questions
Assume that a firm hires an additional employee. If the marginal product for that employee is greater than for the previous employee hired, it must be thatGroup of answer choicesall workers are not paid the same wage.the workers all perform the exact same set of tasks.all workers are paid the same wage.there are gains from specialization.the marginal product of labor is diminishing.
As a firm adds additional workers to its fixed capital, the marginal product of labor typically . (Insert a single word.)
f a business owner can produce more as a whole with an additional worker even if the marginal product associated with that worker is lower than the marginal product associated with the previous worker, then there are:Multiple choice question.increasing marginal returns.diminishing marginal returns.zero marginal returns.negative marginal returns.
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The extra amount of output a firm can generate by adding one more unit of labor is called the product of labor. (Insert a single word.)
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