When a firm is a perfect competitor in the product market,its demand curve for labour will _____ because the _____ product declines as additional workers are hired.

Question

Quizplus · Accepted Answer

In a perfectly competitive product market, the firm is a price taker and the price of the product remains constant. Therefore, when the firm hires additional workers, the marginal product of labor declines because the fixed capital gets crowded and fresh labor produces less output. As a result, the firm's demand for labor curve will slope downward.

When a Firm Is a Perfect Competitor in the Product