Everything else remains the same as we described above in the discussion of the labor demand in perfectly
competitive labor markets. Given the market wage, profit-maximizing firms will hire workers up to the point

where the market wage equals the marginal revenue product, as Figure 14.6 shows.
330 14 • Labor Markets and Income

FIGURE 14.6 Equilibrium Level of Employment for Firms with Market Power For firms with market power in their
output market, they choose the number of workers, L2, where the going market wage equals the firm’s marginal
revenue product. Note that since marginal revenue is less than price, the demand for labor for a firm which has
market power in its output market is less than the demand for labor (L1) for a perfectly competitive firm. As a result,
employment will be lower in an imperfectly competitive industry than in a perfectly competitive industry.

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