Question

13. A. Why is the labor demand curve downward sloping? B. Why is the labor supply curve upward sloping for the market and horizontal for the firm, and what is the MFC?

Answer 1

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Solution A.)

due to diminishing marginal product of labor state that total product increase initially with the increasing rate after that decreasing rate and after that it decreases with increasing rate. hence it shows with more increase in production the firm wants more labor demand less.

hence, the demand curve of demand is downward sloping shown by the marginal product of labor.

Solution B).

Labor supply is a total hour where willing labor wants to work on a given level of the wage rate. at a given increased price(wage) attracted more labor wants to more work. hence it will be upward sloping.

But in the case, the market is perfect competition then the labor supply is the horizontal line where at a given price the firm can hire as much as he can.

MFC - Marginal Factor Cost - is the increase in the total cost paid for an input/factor of production resulting from an additional increase in the number of the input/factor employed.