Question

The optimal amount of labour to hire the amount that maximizes the production function. True/False and why

Answer 1

Answer:

FALSE

Reason: More number of employees will be hired by the firm until the additional benefit received from hiring additional worker is equal to the cost or the wages that have to be paid to that workER. In other words, When MRPL = WAGE RATE (marginal cost of labour), that is the optimal point.

If the profits are maximised but still the cost of additional labour unit is greater than the increase in production, then there is no point of hiring additional worker.