As more labor is hired, the marginal revenue product of a competitive firm

Question

Quizplus · Accepted Answer

According to the law of diminishing marginal returns, as more units of a variable input are added to a fixed input, the marginal product of the variable input will eventually decline. In the case of hiring more labor, this means that as more workers are hired, each additional worker will contribute less and less to total output. Therefore, the marginal revenue product (MRP) of each additional worker will also decline, since MRP is equal to the marginal product of labor multiplied by the output price.

As More Labor Is Hired, the Marginal Revenue Product of a Competitive