This is true if the firm is a monopoly, but it’s also true if the firm is an oligopoly or monopolistically

competitive. In this situation, the value of a worker’s marginal product is the marginal revenue, not the price.

Thus, the demand for labor is the marginal product times the marginal revenue.

The Demand for Labor = MPL x MR = Marginal Revenue Product

# Workers (L)

MPL

1

4

2

3

3

2

4

1

Marginal Revenue $4

$3 $2 $1

MRPL

$16 $9 $4 $1

TABLE 14.3 Marginal Revenue Product

FIGURE 14.5 Marginal Revenue Product For firms with some market power in their output market, the value of
additional output sold is the firm’s marginal revenue. Since MPL declines with additional labor employed and since
MR declines with additional output sold, the firm’s marginal revenue declines as employment increases.
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