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July 24, 2014

July 24, 2014

Posted by **Anonymous** on Friday, April 13, 2012 at 6:37am.

- Finance -
**cheetah**, Monday, August 6, 2012 at 10:13pmMaximizing profits? No. For any given level of capital (or land, or anything else), the Marginal Revenue Product of Labor must be equal to its Marginal Cost (or the wage rate if we assume the labor market is competitive).

Given the numbers above, $100 > $10 (this basically says the next worker brings in $100 to the firm, but only costs them $10). They could still hire more workers at $10, and have them bring in more money (although the $100 would drop for each new worker due to diminishing returns). It falls all the way down to 10 (when 10 = 10) and you won't hire anymore workers (because the next worker would cost you $10, but he would bring in something lower than $10... why hire him then?).

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