Assume that the market demand for a good is p = 100 - Q. Assume that the marginal product of labor is 1 and the firm can get all the labor it needs at a wage equal to 5
Compare the quantity of labor hired if the output market is competitive with the quantity hired if the output market is a monopoly.
If the output market is competitive, then price will equal marginal cost, which is 5. Output is 95, requiring 95 units of labor. If a monopoly controls the output market, the firm sets w = 5 = (100 - 2L), or L = 47.5. Thus, the monopoly hires half as much labor and produces half as much output as a competitive market would.
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