As the quantity of labor employed by a firm decreases, labor's ________ increases.

Question

Quizplus · Accepted Answer

As the quantity of labor employed by a firm decreases, the marginal product of labor increases. This is because the remaining workers are now responsible for producing a larger output, so their individual contributions are more valuable. The value of marginal product is the additional revenue that a firm can generate by hiring one more unit of labor. Therefore, as the quantity of labor employed decreases, the value of marginal product increases.

As the Quantity of Labor Employed by a Firm Decreases