Answer to Question #64009 in Economics for Faisal

Question

Even if workers would work for free, a profit maximizing firm would not hire more than units of labor.
a. 3 b. 4 c. 5 d. 6
Kindly tell which is right answer and why

Answer 1

Theory states that a profit maximizing firm will hire workers up to the point where the marginal revenue product is equal to the wage rate, because it is not efficient for a firm to pay its workers more than it will earn in revenues from their labor.
Therefore the firm is interested in hiring minimal amount of workers.
a. 3
Event is they work for free, minimal number of workers means less costs for working and safety clothes, insurance liabilities etc.