Final answer:
The profit-maximizing condition in real terms is expressed as the equality of the marginal revenue product of labor (MRPN) to the real wage (W/P), where the firm hires workers until MRPN equals the nominal wage divided by the price level.
Step-by-step explanation:
The condition for profit-maximizing in real terms for a firm is to hire workers up to the point where the marginal revenue product of labor (MRPN) equals the real wage, which is the nominal wage (W) divided by the price level (P). Therefore, the correct expression that represents this condition from the given options is A. MRPN = W/P. This equation states that a firm maximizes profit when the additional revenue generated by hiring one more worker is equal to the cost of hiring that worker in real terms.
Using the reference that in a perfectly competitive labor market with a market wage at $20, the profit-maximizing level of employment occurs when the marginal revenue product is $20, we can understand that the firm will continue to hire workers until the extra cost of hiring one more worker is not greater than the extra revenue the worker generates. This is known as the equalizing of the marginal cost and marginal benefit of labor. In a profit-maximizing scenario, the condition can be expressed as MRPN = W/P, where MRPN represents the marginal revenue product of labor, W is the nominal wage, and P is the price level. This equation states that the profit-maximizing level of employment is achieved when the marginal revenue product of labor equals the wage divided by the price level.