If a Profit-Maximizing Firm Hires an Additional Unit of Labor

question 65

Multiple Choice

If a profit-maximizing firm hires an additional unit of labor, what must be true about labor's wage and marginal revenue product?

• A)Its wage always equals its marginal revenue product.
• B)Its wage is always greater than its marginal revenue product.
• C)Its wage is always total revenue minus marginal revenue product.
• D)Its wage is always greater than or equal to its marginal revenue product.
• E)Its wage is always less than or equal to its marginal revenue product.

Understand how to conduct a break-even analysis for a business plan, including the consideration of fixed and variable costs.

Identify and describe common strategies for effectively raising prices in a business context.

Explain the concept of a reference price and the role of a sales force in determining it.

Analyze and understand pricing strategies used by companies, including practices that may mislead customers.

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Definitions:

Marginal Product of Labor

The extra output produced by adding one more unit of labor, holding other inputs constant.

Unit of Labor

A measurement used to represent an hour of work or effort by a worker or laborer.

Wage Rate

The amount of money paid to an employee for a specified quantity of work, often expressed per hour or year.