Which of the following would be a consequence of a fall in the price of the final product in a competitive industry?
A)Each firm's labor demand curve will shift downward.
B)The marginal value product of labor is higher for each firm.
C)The marginal cost curve for each firm will shift outward away from the origin.
D)The employment of labor in the industry will increase.

Question

Quizplus · Accepted Answer

A fall in the price of the final product in a competitive industry would lead to a decrease in the revenue generated per unit of output. Since the marginal value product of labor is dependent on the price of the output, a decrease in the price would lower the marginal value product of labor, causing each firm's labor demand curve to shift downward. This reflects a reduced willingness to pay for labor at each level of employment, given the lower revenue from selling the product.

Which of the Following Would Be a Consequence of a Fall