What does a monopolist’s demand curve for labor look like? How does it compare to the market demand curve for a competitive industry? What does the supply curve of labor to a monopolist look like? Explain.

What will be an ideal response?


The demand curve for labor for a monopoly is downward sloping because of the law of diminishing marginal product. The marginal revenue product curve falls faster in the case of monopoly than in perfect competition because marginal revenue falls faster than price falls as more units are sold. So, the monopoly will tend to hire fewer workers than if the industry was competitive. This is consistent with the fact that monopolies restrict output. The supply curve facing a monopoly is horizontal because the monopoly is still a price taker in input markets.