The MRP curve for labor
A) is downsloping and shows the relationship between wage rates and the quantity of labor demanded.
B) is perfectly elastic if the firm is selling its output competitively.
C) is upsloping and lies above the labor supply curve.
D) will shift location when the wage rate changes.

Question

Quizplus · Accepted Answer

The MRP curve for labor shows the relationship between the wage rate and the quantity of labor demanded. It is downsloping because of the diminishing marginal productivity of labor. As additional units of labor are added to a fixed amount of capital, the extra output produced by each additional unit of labor will eventually decline, causing the MRP curve to slope downward. The MRP curve will shift location when there are changes in other factors affecting productivity, such as advances in technology or changes in the price of other inputs.

The MRP Curve for Labor