Under perfect competition, a profit maximizing firm will hire labour up to the point where the last unit of labor adds
- less to TR as to TC
- as much to TR as to TC
- more to TC than to TR
-
less to TC than to TR
The correct answer is: D
Explanation
Under perfect competition, a profit-maximizing firm will hire labor up to the point where the marginal revenue product of labor (MRP) is equal to the wage rate. MRP represents the additional revenue generated by adding one more unit of labor.
Since the firm aims to maximize profits, it will continue hiring labor until the MRP is greater than or equal to the wage rate. At this point, the last unit of labor hired contributes more to total revenue than to total cost, resulting in increased profits for the firm.