if a competitive firm pays its workers the value of the marginal product of the last worker hired, which of…

if a competitive firm pays its workers the value of the marginal product of the last worker hired, which of the following is true?\na. the firm will not earn any economic profits.\nb. workers will look for employment elsewhere.\nc. the wage will be less than the marginal product.\nd. the firm will not maximize profits.\ne. the contribution of the last worker hired to the firm’s profit will be zero.

if a competitive firm pays its workers the value of the marginal product of the last worker hired, which of the following is true?\na. the firm will not earn any economic profits.\nb. workers will look for employment elsewhere.\nc. the wage will be less than the marginal product.\nd. the firm will not maximize profits.\ne. the contribution of the last worker hired to the firm’s profit will be zero.

Answer

Brief Explanations:

To solve this, we analyze each option using concepts from Economics (a subfield of Business):

  • Option A: In a competitive market, firms can earn economic profits in the short run. Paying workers the value of the marginal product (VMP) doesn't guarantee zero economic profits. So A is incorrect.
  • Option B: If the firm pays VMP, workers are compensated fairly for their marginal contribution. There's no reason to assume they'll seek employment elsewhere. B is incorrect.
  • Option C: The value of the marginal product (VMP) is equal to the wage in a competitive labor market (when firms are profit - maximizing, they hire until ( \text{Wage} = \text{VMP} )). So the wage equals the VMP, not being less. C is incorrect.
  • Option D: A competitive firm maximizes profit by hiring workers until ( \text{Wage} = \text{VMP} ). If it pays ( \text{VMP} ) as wage, it is maximizing profit. D is incorrect.
  • Option E: The profit - maximizing condition is ( \text{Wage} = \text{VMP} ). The contribution of a worker to profit is ( \text{VMP}-\text{Wage} ). If ( \text{Wage}=\text{VMP} ), then ( \text{VMP}-\text{Wage} = 0 ). So the last worker's contribution to profit is zero. E is correct.

Answer:

E. The contribution of the last worker hired to the firm’s profit will be zero.