What is the general rule for hiring for a perfectly competitive firm? Show it on a graph. What is the demand curve for labor on the graph? Explain
What will be an ideal response?
The firm hires workers up to the point at which the additional of hiring the last worker is equal to the additional revenue generated by that worker. In the above figure, the supply curve of labor is horizontal at the market wage W, so the additional cost of hiring a worker is W. The additional revenue is the MRP, so the firm hires L workers. The MRP curve is the firm's demand curve since it indicates the maximum wage that the firm is willing to pay for each worker it wishes to hire.
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Why do decision makers tend to ignore external costs? How can internalizing external costs move us closer to efficient levels of output?
Over the range of output, a firm’s marginal revenue initially increases and then decreases.
Answer the following statement true (T) or false (F)
In the long run, a monopolistically competitive firm produces at minimum average cost.
Answer the following statement true (T) or false (F)
To maximize its profit, a monopolistically competitive firm chooses its level of output by looking for the level of output at which
a. price equals marginal cost. b. marginal revenue equals marginal cost. c. average total cost is minimized. d. All of the above are correct.