Firms in a competitive market will employ workers up until: Select one: a. The real wage...

Firms in a competitive market will employ workers up until:
Select one:
a. The real wage equals the firm’s marginal cost
b. The real wage equals workers’ willingness to supply
c. The real wage equals workers’ marginal product
d. The real wage equals the price of the good sold

Solutions

Expert Solution

Option C is correct

Each worker is paid a real wage which is equal to his marginal product of labour. In terms of nominal prices, there is a nominal wage which is equal to the product of the market price of the product and the marginal product of labour. This implies that as long as the marginal product is greater than the real wage rate, firm will continue to hire workers.

Rahul Sunny answered 1 year ago

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