A firm's demand curve for labor is:
A) the upward-sloping portion of its marginal revenue product curve.
B) the downward-sloping portion of its marginal product curve.
C) the downward-sloping portion of its marginal revenue product curve.
D) horizontal for the firm in perfect competition.

Question

Quizplus · Accepted Answer

A firm's demand for labor is derived from its marginal revenue product (MRP) curve, which shows the additional revenue generated by each additional unit of labor. The firm will hire workers up to the point where the MRP equals the wage rate. The portion of the MRP curve that corresponds to the level of employment where the firm stops hiring additional workers is the firm's demand curve for labor, which is downward-sloping because the MRP diminishes as more workers are hired.

A Firm's Demand Curve for Labor Is