ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A competitive, profit-maximizing firm hires workers up to the point where the value of the marginal product of labor is equal to the wage.

Detailed explanation-2: -The theory states that workers will be hired up to the point when the marginal revenue product is equal to the wage rate. If the marginal revenue brought by the worker is less than the wage rate, then employing that laborer would cause a decrease in profit.

Detailed explanation-3: -We can define a Perfectly Competitive Labor Market as one where firms can hire all the labor they wish at the going market wage. Think about secretaries in a large city. Employers who need secretaries can probably hire as many as they need if they pay the going wage rate.

Detailed explanation-4: -Explanation: To maximize profits, a perfectly competitive firm will hire until its marginal revenue of labor equals its marginal cost of labor. The marginal cost of labor equals the wage rate, which is $14 per hour. The marginal revenue of labor is the marginal product of labor multiplied by the price of the good.