Other things equal, we would expect the labor demand curve of a monopolistic seller to
A)decline more rapidly than that of a purely competitive seller.
B)decline less rapidly than that of a purely competitive seller.
C)decline at the same rate as that of a purely competitive seller.
D)be more elastic than that of a purely competitive seller.

Question

Quizplus · Accepted Answer

The labor demand curve of a monopolistic seller declines more rapidly than that of a purely competitive seller because the monopolist faces a downward-sloping product demand curve. This means that to sell additional output, the monopolist must lower the price of its product, which in turn affects the marginal revenue product of labor more adversely compared to a purely competitive seller, who faces a perfectly elastic demand at the market price.

Other Things Equal, We Would Expect the Labor Demand Curve