Business Case Studies & Business Publications

The Marginal Product of Labor

Rodriguez, Peter L...

Technical Note

The Marginal Product of Labor

Rodriguez, Peter L.; Yemen, Gerry

GEM-0132 | Published March 19, 2015 | 7 pages Technical Note

Collection: Darden School of Business

Product Details

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.

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