Question

A profit-maximizing firm in a competitive market that is producing on a production curve where the marginal product of labor is diminishing also has:

Answer 1

Answer: A. a downward-sloping labor demand curve.

Explanation:

If the marginal product of labor is diminishing then that means that for every extra worker hired, less products are made than the last worker. As a result of this, companies will not want to pay high wages to workers because they would be bringing in less revenue when hired.

This will cause a downward-sloping labor demand curve that shows that as more workers are hired, the company would like to pay less wages because each new worker is only producing less than the last worker.