... to answer that question. The wage is the same as the marginal resource cost of labour as long as the labour market is competitive. If the labour market is competitive, then the firm takes a wage from the supply and demand conditions in the labour market. The marginal resource cost is the change in total cost/the change in labour. The firm's goal is to maximise profit. As it considers hiring one more worker, it examines the additional cost and the additional revenue from that hiring, and decides whether or not hiring the workers adds or detracts from economic profit. If it adds to profit the firm wishes to hire the worker. If it detracts from profit, the firm declines to hire the worker. The firm increases its quantity of workers demanded at lower wages because as labour use increases against fixed inputs, the value of each worker's marginal product declines. (In ...

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