If the marginal product of labor is decreasing in labor, then a firm-level labor demand curve is:

Question

Quizplus · Accepted Answer

If the marginal product of labor is decreasing in labor, then the additional output produced by adding one more unit of labor is less than the additional output produced by adding the previous unit of labor. This means that the firm's total output will increase at a decreasing rate as more labor is added. In other words, the firm's marginal revenue product of labor (MRP) curve will be downward sloping. Since labor demand is derived from MRP, the firm-level labor demand curve will also be downward sloping or negatively sloped.

If the Marginal Product of Labor Is Decreasing in Labor