When is it not in the best interest of a company to hire additional workers in the short run? when the average product of labor is decreasing when the firm is in Stage II of the production process when the marginal revenue product equals zero when the wage rate is equal to or greater than labor's marginal revenue product

Question

Business

Derrick Bennett

23 July, 13:53

When is it not in the best interest of a company to hire additional workers in the short run? when the average product of labor is decreasing when the firm is in Stage II of the production process when the marginal revenue product equals zero when the wage rate is equal to or greater than labor's marginal revenue product

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Fido · Answer 1

when the wage rate is equal to or greater than labor's marginal revenue product

Explanation:

Wage rate means the payment made to the workers against work done by them which could based on per unit or based on labor input measured usually it is paid on hourly basis, whereas Marginal revenue product determines the marginal value of the product, which is actually market worth of every extra unit of the product.

If the wage rate equal to the market value of the product. then there will be no profit on the product. If the wage rate higher than the market value of the product then there will be a loss on the product. So, both of these situations are not in the best interest of a company because basic objective of the company is to increase the shareholders wealth.