A firm hiring labor in a perfectly competitive labor market faces a
A) downsloping labor supply curve and upsloping labor demand curve.
B) upsloping labor supply curve and downsloping labor demand curve.
C) upsloping labor supply curve and horizontal labor demand curve.
D) horizontal competitive wage curve and downsloping labor demand curve.

Question

Quizplus · Accepted Answer

In a perfectly competitive labor market, the firm is a wage taker, meaning it faces a horizontal labor supply curve at the market wage rate. The labor demand curve is downsloping due to diminishing marginal returns.

A Firm Hiring Labor in a Perfectly Competitive Labor Market