Under perfect competition, a profit maximizing firm will hire labour up to the point where the last unit of labor adds

Analyze the question: It asks about the hiring decision of a profit-maximizing firm in a perfectly competitive market. The firm hires labour up to a certain point, and we need to describe what the last worker adds to revenue compared with cost.

Concept: A firm hires labour by comparing two things:

• Marginal Revenue Product of labour (MRP): the extra Total Revenue (TR) from hiring one more worker. MRP = MP × MR (under perfect competition, MR = Price, so MRP = MP × P).
• Marginal Cost of labour (MC, i.e. the wage): the extra Total Cost (TC) of hiring that worker. Under perfect competition in the labour market, this is the wage rate (W).

Step-by-step reasoning:

1. If MRP > wage, the worker adds more to TR than to TC. Profit rises, so hire more.
2. If MRP < wage, the worker adds more to TC than to TR. Profit falls, so hire fewer.
3. Profit is at its maximum when the two are equal: MRP = W, meaning the extra revenue equals the extra cost.

So the last unit of labour hired adds as much to total revenue as it adds to total cost.

Checking the options:

• A. Less to TR than to TC: the worker would reduce profit, so this is wrong.
• B. As much to TR as to TC: this is the equilibrium condition (MRP = MC), so it is correct.
• C. More to TC than to TR: this means a loss on the extra worker, so it is wrong.
• D. Less to TC than to TR: the firm would still gain by hiring more, so it has not yet reached the maximum.

Exam tip: Remember that profit is maximized where "marginal benefit = marginal cost". For labour, that is MRP = wage. For output, it is MR = MC. Any JAMB question that says "up to the point where" is usually pointing to the equality condition.