Managerial Economicsintermediate
According to the marginal decision rule, under which condition should a profit-maximizing firm hire an additional worker?
Answer
The marginal revenue product of labor exceeds the wage.
Explanation
### Why this is right
- **A** is correct because added income greater than the wage means the worker contributes more than the worker costs.
- **B** is correct because a value below the wage means the cost exceeds the additional income.
- **C** is correct because equality is the stated stopping condition.
### The concept
The rule compares marginal benefit with marginal cost for an additional unit of labor. It does not require all workers to add the same amount; the manager compares each additional worker's value with the relevant wage.
### The other options
- **D. The rule says every worker always adds the same income**: The rule does not state that workers have identical effects on income.
### Terms
- **Marginal**: Relating to the effect of adding one more unit.
### Remember
The comparison is about the next worker, not an average worker.
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