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

question 32

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 less than or equal to its marginal revenue product.

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Definitions:

Capital Gains

The income gained when the selling price of assets such as stocks, bonds, or real estate surpasses their original buying price.

Economic Growth

An increase in the production of goods and services in an economy over a period of time.

Short-Term Capital Gain

Profit from the sale of an asset held for less than a year, subject to tax at ordinary income tax rates.

Net Working Capital

Represents a measure of a firm's liquidity by calculating the excess of current assets over current liabilities, portraying the company's operational efficiency.