Chapter 13R, Problem 4MCQ

To determine

The correct option that defines the downward sloping curve for labors.

Answer to Problem 4MCQ

Option d is correct.

Explanation of Solution

Explanation for correct option:

d.

Demand curve that is sloping downward depicts the diminishing marginal returns. In simple words, by increasing labors the marginal returns or the marginal output produce by labor declines. Therefore, option d is correct.

Explanation for incorrect options:

a.

Market power allows the firm to enjoy the profit above than normal profit. Labor’s demand curve if sloping downward then it means the marginal returns are diminishing or declining. Therefore, option a is incorrect

b.

Demand curve slopes downward when the economies of scale is utilized reaches beyond the appropriate output level. Therefore, option b is incorrect.

c.

Diseconomies of scale are referred as the capacity level at which profit earned starts declining. In other words, it refers to the level of output at which cost per unit produced is increased. Therefore, option c is also incorrect.

e.

If marginal returns are increased then the demand curve will be upward curve instead of downward sloping curve. Therefore, option e is incorrect.

Economics Concept Introduction

Factor of production: Factor of production refers to the components or the resources that are required for producing intangible or tangible products.

Factor income: Factor income refers to returns received by the producer for inserting each factor of production as an input.