CFA Practice Question

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CFA Practice Question

For profit maximization a firm should hire the quantity of labor at which the ______

I. marginal revenue of labor (MR) equals the wage rate (W).
II. marginal revenue product of labor (MRP) equals the marginal cost (MC).
III. marginal revenue of labor (MR) equals the marginal cost (MC).
IV. marginal revenue product of labor (MRP) equals the wage rate (W).
Correct Answer: III and IV

The wage rate is the price of labor.

User Contributed Comments 1

User Comment
DonAnd 2 conditions for profit maximization in the labor force:-

1) MRP = Wage rate
2) MR = MC
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