Asked by Megan McDermott on May 10, 2024
Verified
The labor demand curve of a purely competitive seller:
A) slopes downward because the elasticity of demand is always less than unity.
B) slopes downward because of diminishing marginal productivity.
C) is perfectly elastic at the going wage rate.
D) slopes downward because of diminishing marginal utility.
Labor Demand Curve
A graphical representation showing the relationship between the wage rate and the quantity of labor that employers are willing to hire.
Purely Competitive Seller
A seller operating in a market where goods are homogeneous, and there are no barriers to entry, allowing for many competitors.
- Recognize the role of diminishing marginal productivity in determining labor demand.
Verified Answer
PS
Prasad SahooMay 13, 2024
Final Answer :
B
Explanation :
The labor demand curve of a purely competitive seller slopes downward primarily due to the law of diminishing marginal productivity. This principle states that as more units of labor are added to a fixed amount of other inputs, the additional output produced by the extra units of labor will eventually decrease.
Learning Objectives
- Recognize the role of diminishing marginal productivity in determining labor demand.