Answer:
marginal revenue product of labor is equal to the marginal cost of labor.
Explanation:
In a competitive capitalist economy, firms adopt their strategy of maximizing profit by producing on the scale where marginal revenue (price) equals marginal cost (cost of producing one more unit). The same applies to the rationalization of productive inputs, such as labor. The firm will adopt the amount of production-maximizing labor in which marginal labor productivity (how much more worker produces) equals marginal labor cost (cost of hiring an extra worker). As long as marginal labor productivity is higher than marginal labor cost, the firm has hired. The moment these accounting identities match, the firm will stop contracting because this is the point of maximum productivity that will be able to maximize profit.
