The labour demand curve in a perfectly competitive factor market is the horizontal sum of all firms' _____ product of labour curves.
A) marginal
B) value of the marginal
C) marginal physical
D) average physical

Question

Quizplus · Accepted Answer

In a perfectly competitive factor market, all firms are price takers, which means they face a horizontal supply curve for the input. As a result, each firm's demand curve for labour is the same as the market's demand curve, which is the value of the marginal product of labour curve. Therefore, the horizontal sum of all firms' value of the marginal product of labour curves gives the labour demand curve in the market.

The Labour Demand Curve in a Perfectly Competitive Factor Market