The demand for labor curve will be less elastic for the industry than for the firm because
A)if all firms hire more labor, increased output will lower product price and therefore the marginal revenue product curve.
B)if all firms hire more labor, the product price will rise.
C)if all firms hire more labor, diminishing returns will not set in as quickly.
D)industry demand for labor is more elastic than the firm's demand for labor.

Question

Quizplus · Accepted Answer

If all firms in the industry hire more labor, the increased output will lower the product price, which means that the marginal revenue product curve will shift downwards. As a result, the demand for labor will be less elastic for the industry as a whole because the industry cannot easily pass on cost increases to consumers without losing sales to competitors.

The Demand for Labor Curve Will Be Less Elastic for the Industry