For a firm hiring labor in a perfectly competitive labor market, the marginal revenue product curve slopes downward after some point because as more of a factor is employed, which of the following declines?

Question

BlackTom AI · Accepted Answer

The prompt asks us to identify which quantity declines as more of a factor is employed, causing the marginal revenue product (MRP) curve to slope downward in a perfectly competitive labor market.
Option 1: Marginal product. This is the correct concept: as you hire more workers, the additional output produced by each extra worker (the marginal product of labor) tends to fall due to diminishing returns, which in turn reduces the MRP since MRP = P × MP_L. The fall in MP_L leads to a downward-sloping MRP curve when the output price P is constant.
Option 2: Wage rates. Wage is the price of labor, not the factor whose decline causes the MRP curve to slope downward. While wages can influence hiring decisions, the reason the MRP curve slopes downward is tied to output production, not the wage level itself.
Option 3: Marginal factor cost. In a perfectly competitive labor market, the wage equals the marginal factor cost, but the MFC itself isn’t what declines to drive the downward slope of MRP. The MRP declines because MP_L declines, not because MFC changes.
Option 4: Marginal cost. Marginal cost relates to the cost of producing one more unit of output and can interact with demand, but it is not the specific factor that explains why MRP falls as more labor is added. The downward slope of MRP hinges on diminishing MP, not directly on MC.
Option 5: Total output. Total output increases with more labor, at least initially, and does not explain why the incremental benefit of an additional worker (the MRP) declines. The downward slope is about the rate of gain from the next unit of labor, i.e., MP, not about total output magnitude.
In summary, the core mechanism is the decline in marginal product of labor as more units are employed, which translates into a falling marginal revenue product when price is constant. This aligns with the standard theory of diminishing returns in production.

For a firm hiring labor in a perfectly competitive labor market, the marginal revenue product curve slopes downward after some point because as more of a factor is employed, which of the following declines?单项选择题

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