"Other things being equal, the monopolist hires fewer workers than would be hired than a perfectly competitive industry." Do you agree or disagree? Why?

What will be an ideal response?


Agree. For competitive firms, marginal revenue product equals marginal physical product multiplied by product price. For a monopoly, marginal revenue product equals marginal physical product multiplied by marginal revenue. Since marginal revenue falls faster than price, MRP of a monopolist falls faster than the price in a competitive industry. Marginal factor cost is the same for both, so the equilibrium quantity of labor is less for monopoly than for perfect competition.

Economics

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