A profit-maximizing, competitive firm for which the marginal product of labor is diminishing also experiences
A)a perfectly inelastic supply of labor.
B)a perfectly elastic supply of labor.
C)a downward-sloping demand for labor.
D)an upward-sloping demand for labor.

Question

Quizplus · Accepted Answer

When the marginal product of labor is diminishing, the firm will hire fewer workers as the cost of employing an additional worker will increase. This means that the demand for labor will be downward-sloping, as the firm is willing to pay a higher wage for the first few workers, but will become less willing to pay higher wages for additional workers as their marginal product decreases.

A Profit-Maximizing, Competitive Firm for Which the Marginal Product of Labor