The marginal productivity principle says that a profit-maximizing firm should
A. hire capital until its marginal product is zero.
B. hire labor until another worker costs more to hire than he or she can earn for the firm.
C. hire the quantities of capital and of labor at which their marginal products are equal.
D. hire capital until its marginal product is negative.
Answer: B
You might also like to view...
What are the functions of depository institutions?
What will be an ideal response?
Applying a uniform markup to set the price of the various products sold by a firm is more profitable than varying the markup based on differences in the price elasticity of demand for the firm's products
Indicate whether the statement is true or false
Faced with an uncertain situation, the best decision for a person obeying the von-Neumann Morgenstern axioms: a. minimizes loss relative to the status quo
b. minimizes variability across possible outcomes. c. maximizes the expected payoff. d. maximizes expected utility.
Improvements in information technology over the past decade have enhanced labor productivity. What has been a likely result of this change?
A. Unemployment has increased. B. Capital productivity has declined. C. Entrepreneurs no longer have an incentive to invest in information technology. D. The rate of economic growth has increased.