The firm's value of marginal product curve slopes downward:
A)only if the firm is a perfect competitor in the product market.
B)because of diminishing returns.
C)only if the firm is a perfect competitor in the labor market.
D)only if the firm is a perfect competitor in both the labor and product market.

Question

Quizplus · Accepted Answer

The law of diminishing returns states that as more units of one input are added, while holding all other inputs constant, the marginal product of that input will eventually decrease. This means that the firm's value of marginal product will also decrease as more units of the input (such as labor) are added, resulting in a downward-sloping curve. This is true regardless of whether the firm is a perfect competitor in the product or labor market.

The Firm's Value of Marginal Product Curve Slopes Downward