A firm's demand curve for labor is the downward-sloping part of its MRP curve of labor.

Question

Quizplus · Accepted Answer

This is true because the MRP (marginal revenue product) curve of labor shows the additional revenue that a firm can generate by hiring an additional unit of labor. As the number of workers hired increases, the marginal revenue product typically decreases due to diminishing marginal returns. This means that the firm will demand fewer workers at a higher wage rate, resulting in a downward-sloping demand curve for labor.

A Firm's Demand Curve for Labor Is the Downward-Sloping Part