The presence of diminishing marginal returns to labor leads to decreasing marginal revenue product of labor and a downward-sloping demand for labor curve.

Question

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Diminishing marginal returns to labor means that each additional unit of labor employed will result in a smaller increase in output. This, in turn, leads to a decrease in the marginal revenue product of labor, which is the additional revenue generated by each additional unit of labor. As a result, firms will demand fewer units of labor as the cost of employing additional workers exceeds the revenue generated from their work. This creates a downward-sloping demand curve for labor.

The Presence of Diminishing Marginal Returns to Labor Leads to Decreasing