Final answer:
The MRTSLK formula stands for the Marginal Rate of Technical Substitution, which helps firms in optimizing production inputs. The value of the marginal product of labor determines the additional revenue from hiring more labor. Profit-maximizing employment is achieved when this value equals the market wage.
Step-by-step explanation:
The MRTSLK formula in economics represents the Marginal Rate of Technical Substitution of labor for capital. It indicates the rate at which labor can be substituted for capital in the production process while maintaining the same level of output. This concept is crucial for firms in understanding how to adjust inputs for cost minimization and efficient production.
In the context of labor markets, the value of the marginal product (VMP) at each level of labor is the additional revenue a firm earns from hiring an additional unit of labor. If a firm operates in a perfectly competitive labor market with a market wage of $12, the firm will continue to hire labor until the value of the marginal product of labor equals the wage rate. Therefore, the profit maximizing level of employment is reached when the VMP of the last worker hired is exactly $12.