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

Question

Quizplus · Accepted Answer

The demand curve for labor is the portion of the value of the marginal product curve that is downward-sloping. This is because the firm will only hire additional workers if the value of the additional output they produce is greater than the cost of hiring them, so as the number of workers increases, the marginal product of labor decreases and the value of their contribution to output decreases. Therefore, the amount the firm is willing to pay for each additional unit of labor decreases, resulting in a downward-sloping demand curve for labor.

A Firm's Demand Curve for Labor Is