A reason why a perfectly competitive firm's demand for labour curve slopes downward is that
A)each additional unit of labour hired is less efficient than previously hired units.
B)in the short run, as more labour is hired, labour's marginal product falls because of the law of diminishing returns.
C)the extra cost of hiring additional units of labour increases as a firm hires more units of labour.
D)the firm's demand curve for the product that uses labour is downward sloping.

Question

Quizplus · Accepted Answer

In the short run, the law of diminishing returns causes the marginal product of labour to decrease as more labour is hired. As a result, the firm's demand for labour curve slopes downward because each additional unit of labour hired adds less to the firm's output than the previous unit, decreasing the firm's willingness to pay for additional units of labour.

A Reason Why a Perfectly Competitive Firm's Demand for Labour