In the one-input model, a decrease in output price will always cause labor demand to shift in.

Name: In the one-input model, a decrease in output price will always cause labor demand to shift in.
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Question

Quizplus · Accepted Answer

In the one-input model, where labor is the only input, a decrease in output price reduces the revenue a firm can make per unit of output, which in turn reduces the firm's demand for labor since the value of the marginal product of labor falls.

In the One-Input Model, a Decrease in Output Price Will