The demand curve for a factor is that part of the MRP where marginal product is
A)rising.
B)falling.
C)positive.
D)negative.

Question

Quizplus · Accepted Answer

The demand curve for a factor is the part of the marginal revenue product (MRP) curve where marginal product is falling. This is because as more of the factor is used, the marginal product of the factor decreases due to the law of diminishing marginal returns. So, firms are willing to pay a higher price for the factor up to the point where the marginal product starts to decrease.

The Demand Curve for a Factor Is That Part of the MRP