Final answer:
A competitive firm will hire labor until the market wage equals the marginal revenue product, which is the value of additional product created by the last worker hired, multiplied by the firm's output price, hence the answer is A. Real Wage.
Step-by-step explanation:
The question addresses the point at which a competitive firm will stop hiring additional labor. According to the theory of labor markets, particularly in a perfectly competitive output market, a profit-maximizing firm will continue to hire labor until the point where the market wage equals the marginal revenue product (MRP). The MRP is the additional revenue a firm earns from hiring one more unit of labor and it is calculated by multiplying the marginal product of labor by the firms output price.
In practical terms, this means a firm will assess the additional output produced by the last worker hired and multiply this by the price at which they can sell their product. If this value known as marginal revenue product is higher than the wage they have to pay for a worker (the real wage), they will hire more labor. Conversely, once the MRP equals the market wage, the firm will no longer find it profitable to hire additional labor, since the cost of hiring (wage) now equals the revenue generated by that last worker. Thus, the correct answer to the question is A. Real Wage.