The marginal revenue product curve slopes downward only if the firm is a price taker in the product market.

Question

Quizplus · Accepted Answer

The marginal revenue product curve can slope downward even if the firm is not a price taker. This happens when the increase in output leads to a decrease in the price of the product, meaning that the marginal product of labor is decreasing as well. In this case, the marginal revenue product curve slopes downwards reflecting the diminishing returns to labor.

The Marginal Revenue Product Curve Slopes Downward Only If the Firm