What is the relationship between a perfectly competitive firm's MRP curve for an input and that firm's demand curve for that input? A The firm's demand curve for an input is the downward-sloping portion of the MRP curve

Economics Dec 12, 2020

What is the relationship between a perfectly competitive firm's MRP curve for an input and that firm's demand curve for that input?

A The firm's demand curve for an input is the downward-sloping portion of the MRP curve.

B They are unrelated.

C They are identical except for the units (and scale) of their vertical axes.

Expert Solution

The relationship between the MRP Curve of a perfectly competitive firm for a single input and the demand curve of the firm for the same input states that as the firm focuses on using a single variable in the process of production, the MRP curve represents the demand curve for the firm during the short-run. Thus, the demand curve of the firm for a single input is sloped downward in comparison to the MRP curve. (Correct answer: A)

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