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The Marginal Product of Labor
Rodriguez, Peter L.; Yemen, Gerry Technical Note GEM-0132 / Published March 19, 2015 / 7 pages.
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Product Overview

This technical note explores one of the most important topics for firms and their managers: labor. In particular, how many people should a firm hire, and how much should they be paid? The note uses the example of Wail Al-Hayani, the owner of a kitchen that provides fresh prepared food to quick-service restaurants, to explore hiring decisions and setting wages and salaries?and the marginal values that matter. If Al-Hayani hires more workers, it would mean extra output and revenue, so long as the value of the marginal product of labor exceeds the wage. To maximize profits, a competitive firm should hire workers up to the point where the value of the marginal product of labor equals the wage.


Learning Objectives

? Introduce the marginal product of labor ? Explore the value of the marginal product ? Examine the implications of the marginal product of labor

  • Videos List

  • Overview

    This technical note explores one of the most important topics for firms and their managers: labor. In particular, how many people should a firm hire, and how much should they be paid? The note uses the example of Wail Al-Hayani, the owner of a kitchen that provides fresh prepared food to quick-service restaurants, to explore hiring decisions and setting wages and salaries?and the marginal values that matter. If Al-Hayani hires more workers, it would mean extra output and revenue, so long as the value of the marginal product of labor exceeds the wage. To maximize profits, a competitive firm should hire workers up to the point where the value of the marginal product of labor equals the wage.

  • Learning Objectives

    Learning Objectives

    ? Introduce the marginal product of labor ? Explore the value of the marginal product ? Examine the implications of the marginal product of labor