Asked by Hannah Kristen on May 03, 2024
Verified
To maximize profits, a competitive firm will maximize the difference between MRP and the wage rate for the laborers it hires.
MRP
Marginal Revenue Product, which is the additional revenue generated from employing one more unit of a resource.
Wage Rate
The amount of money paid to an employee per unit of time worked, often hourly, daily, or annually.
- Acquire an understanding of how marginal revenue product (MRP), wage rates, and recruitment choices are interrelated.
Verified Answer
NH
Nurul HuwaidaMay 09, 2024
Final Answer :
False
Explanation :
A competitive firm maximizes profits by hiring labor up to the point where the marginal revenue product (MRP) of labor equals the wage rate, not by maximizing the difference between MRP and the wage rate.
Learning Objectives
- Acquire an understanding of how marginal revenue product (MRP), wage rates, and recruitment choices are interrelated.