According to the rational rule for employers, when should a firm hire an additional worker?

• A. When the average cost of all workers is less than the wage paid
• B. When the marginal product of labor is zero
• C. When the total revenue equals total cost
• D. When the marginal benefit of hiring the worker is greater than or equal to the marginal cost

Answer: (D)

Verified step by step guidance

1. Understand the rational rule for employers: firms hire additional workers as long as the benefit from hiring one more worker is at least as great as the cost of hiring that worker.
2. Identify the marginal benefit of hiring an additional worker, which is the additional revenue generated by that worker, often called the marginal revenue product of labor (MRP). This can be expressed as \(\text{MRP} = \text{Marginal Product of Labor} \times \text{Price of Output}\).
3. Identify the marginal cost of hiring an additional worker, which is typically the wage rate paid to the worker.
4. Apply the hiring rule: hire an additional worker if and only if \(\text{MRP} \geq \text{Wage}\), meaning the extra revenue from the worker is at least equal to the wage paid.
5. Recognize that if the marginal product of labor is zero, the marginal revenue product is zero, so hiring more workers would not increase revenue and is not rational.