Final answer:
Firms will hire more employees as long as the wage is less than the marginal product of labor, aiming to match the wage with the marginal revenue product to maximize profits.
Step-by-step explanation:
Firms will continue to hire more employees as long as the wage is less than the marginal product of labor. In the context of a competitive labor market, this is known as hiring up to the point where the market wage equals the marginal revenue product of labor. Therefore, profit-maximizing firms in perfectly competitive labor markets will seek to hire additional employees until the wage they would have to pay for one more employee is equal to the additional revenue generated by that employee's work.
For example, if the going market wage is $20, a profit-maximizing firm will hire workers up to the point where the marginal revenue product is also $20. This equilibrium of wage and marginal revenue product is crucial for firms to maximize their profits while ensuring they are not paying more for labor than the value of the work being produced.