A firm's demand curve for labor slopes downwards because

Question

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The law of diminishing marginal returns states that as more units of a variable input (such as labor) are added to a fixed input (such as capital), the marginal product of the variable input will eventually decrease. This means that as a firm hires more workers, each additional worker will contribute less and less to the firm's output, and therefore the firm will be willing to pay a lower wage for each additional worker. This leads to a downward-sloping demand curve for labor.

A Firm's Demand Curve for Labor Slopes Downwards Because