Chapter 69, Problem 5MCQ

To determine

The individual’s demand curve for labor.

Answer to Problem 5MCQ

From the available options, the correct option is downward sloping.

Explanation of Solution

Due to diminishing marginal product, the individual firm’s demand curve would be downward sloping. By using one additional unit of labor the total output starts decreasing.

When the demand for labor is constant, the curve would be upward-sloping. The demand curve would be horizontal when the demand for labor ties to the price or wage. And, the demand curve would be vertical when changes in wages do not affect the labor demand and the demand curve would not be U-shaped.

Therefore, all options: b, c, d, and e are incorrect which means the correct option is a because the demand curve of individual firms slopes downward by hiring more units of labor as more and more workers lead to a decline in the marginal product of the firm.

Economics Concept Introduction

Introduction: A demand curve is a graphical representation that shows how sensitive demand is toward the price of a good or service.