$4

$3

$9

$5

$16

$7

$25

$9

TABLE 14.5 The Marginal Cost of Labor

There are a couple of things to notice from the table. First, the marginal cost increases faster than the wage

rate. In fact, for any number of workers more than one, the marginal cost of labor is greater than the wage. This

is because to hire one more worker requires paying a higher wage rate, not just for the new worker but for all

the previous hires also. We can see this graphically in Figure 14.7.

FIGURE 14.8 The Marginal Cost of Labor Since monopsonies are the sole demander for labor, they face the market

supply curve for labor. In order to increase employment they must raise the wage they pay not just for new workers,

but for all the existing workers they could have hired at the previous lower wage. As a result, the marginal cost of
hiring additional labor is greater than the wage, and thus for any level of employment (above the first worker), MCL is
above the Market Supply of Labor.
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