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JAMB Economics 1993 Question 13

Question 13

Labour Market

If profit maximization is assumed to be the objective of a business enterprise, labour must be paid a wage rate equal to the

  1. A.marginal revenue of the enterprise
  2. B.marginal revenue product of labour in the enterprise
  3. C.average revenue of the enterprise
  4. D.marginal cost of production
Show the answer and explanation

Answer: B (marginal revenue product of labour in the enterprise)

Explanation

A profit-maximising firm hires workers until the wage equals the extra revenue the last worker brings in, the marginal revenue product of labour.