Asked by Melissa Borrero on Jul 20, 2024
Verified
The labor demand curve of an imperfectly competitive seller is downsloping:
A) solely because of diminishing marginal utility.
B) because of both diminishing returns and the necessity to lower price to sell more output.
C) solely because product price must be reduced to sell more output.
D) solely because of diminishing returns.
Labor Demand Curve
A graphical representation that shows the relationship between the quantity of labor demanded by employers and the wage rate.
Imperfectly Competitive
Refers to market structures that do not meet the criteria of perfect competition, featuring elements like price makers, barriers to entry, and product differentiation.
Diminishing Returns
A principle stating that if one factor of production is increased while others remain constant, the overall returns will eventually decrease after a certain point.
- Gain an understanding of the fundamentals of imperfect competition and its influence on labor market conditions.
- Distinguish between the labor demand curve in perfectly competitive and imperfectly competitive markets.
Verified Answer
AK
Armen KarapetyanJul 21, 2024
Final Answer :
B
Explanation :
Imperfectly competitive sellers have some power to set prices, but they still face competition that limits their ability to raise prices without losing sales. As they increase output, they will hit diminishing returns to their inputs, which will make them less productive and increase their costs. To sell more output, they will have to lower their price, which will result in a downsloping labor demand curve. Therefore, the labor demand curve for an imperfectly competitive seller is influenced by both diminishing returns and the necessity to lower price to sell more output.
Learning Objectives
- Gain an understanding of the fundamentals of imperfect competition and its influence on labor market conditions.
- Distinguish between the labor demand curve in perfectly competitive and imperfectly competitive markets.