The labor demand curve of an imperfectly competitive seller is downsloping
A) solely because of diminishing marginal utility.
B) because of both diminishing returns and the necessity to lower price to sell more output.
C) solely because product price must be reduced to sell more output.
D) solely because of diminishing returns.

Question

Quizplus · Accepted Answer

An imperfectly competitive seller faces a downward-sloping demand curve for its product due to both diminishing returns (as each additional unit of input results in decreasing marginal product) and the necessity to lower price to sell more output (as the seller has market power but still faces competition from substitutes). Therefore, both factors contribute to the downsloping labor demand curve.

The Labor Demand Curve of an Imperfectly Competitive Seller Is