The labor demand curve of a firm that sells its product in a purely competitive market
A)is horizontal or perfectly elastic.
B)is downsloping and flatter than the labor demand curve of a firm that sells its product in an imperfectly competitive (or monopolistic)market.
C)is upsloping.
D)is downsloping and steeper than the labor demand curve of a firm that sells its product in an imperfectly competitive (or monopolistic)market.

Question

Quizplus · Accepted Answer

The labor demand curve of a firm in a purely competitive market is downsloping due to the law of diminishing returns, but it is flatter compared to that of a firm in an imperfectly competitive market because a purely competitive firm can sell additional output at the market price, whereas an imperfectly competitive firm must lower its price to sell additional output, affecting its marginal revenue product of labor more significantly.

The Labor Demand Curve of a Firm That Sells Its