A Reason Why a Perfectly Competitive Firm's Demand for Labour

question 185

Multiple Choice

A reason why a perfectly competitive firm's demand for labour curve slopes downward is that

• A)each additional unit of labour hired is less efficient than previously hired units.
• B)in the short run, as more labour is hired, labour's marginal product falls because of the law of diminishing returns.
• C)the extra cost of hiring additional units of labour increases as a firm hires more units of labour.
• D)the firm's demand curve for the product that uses labour is downward sloping.

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Definitions:

Unemployment Insurance

A social welfare program that provides temporary financial assistance to workers who have lost their jobs through no fault of their own.

Minimum-Wage Law

Legislation that establishes the minimum amount per hour that employers must pay their employees.

Labor Shortage

A condition in which employers do not have enough employees to fill the available job vacancies.

Minimum Wage Laws

Legislation that sets the lowest hourly wage rate that an employer can legally pay its employees.