When drawn against the current real wage,the labor demand curve is
A) upward sloping because the marginal product of labor rises with the quantity of labor employed.
B) upward sloping because the marginal product of labor declines with the quantity of labor employed.
C) downward sloping because the marginal product of labor rises with the quantity of labor employed.
D) downward sloping because the marginal product of labor declines with the quantity of labor employed.

Question

Quizplus · Accepted Answer

The labor demand curve is downward sloping because the marginal product of labor declines with the quantity of labor employed. This is because as more and more workers are added to a fixed amount of capital and other inputs, the additional output produced by each additional worker (marginal product) tends to decline. As the marginal product of labor declines, firms are willing to hire fewer workers at any given wage rate, resulting in a downward-sloping labor demand curve.

When Drawn Against the Current Real Wage,the Labor Demand Curve