- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 1. The Firm and Market Structures
- Subject 3. Marginal Revenue, Marginal Cost and Profit Maximization
CFA Practice Question
If a firm observes that the marginal revenue product of labor exceeds the wage at the current level of hours, the firm is likely to ______
A. decrease the hours of labor.
B. increase the hours of labor.
C. raise wages.
Explanation: The firm will maximize profits when marginal revenue product is equal to the wage. Since marginal revenue product is decreasing, if it is greater than the wage, the firm can increase profits through increasing labor hours.
User Contributed Comments 3
User | Comment |
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aniketcpp | any explanation plz ? |
jasonkwk | work.. work. work... Warcraft grunt sound.. |
Paul7059 | Nice one Jasonkwk |