The marginal revenue product of labor in a competitive market decreases as a firm increases the quantity of labor used because of the:

Question

Quizplus · Accepted Answer

The law of diminishing returns states that as a firm increases the quantity of a variable input, while keeping all other inputs constant, the marginal product of the variable input will eventually decrease. This leads to a decrease in the marginal revenue product of labor, as firms are willing to pay less for each additional unit of labor when their productivity is decreasing. Choices B, C, and D are not directly related to the decreasing marginal revenue product of labor in a competitive market.

The Marginal Revenue Product of Labor in a Competitive Market