Marginal resource (labor) cost will exceed the wage rate when there is imperfect competition in the hiring of labor.

Question

Quizplus · Accepted Answer

When there is imperfect competition in the labor market, firms have some degree of market power to influence wages. In this case, the marginal resource cost (MRC) of hiring an additional unit of labor will be higher than the wage rate because firms have to pay more to attract additional workers due to their monopoly power. Therefore, in imperfectly competitive labor markets, MRC will exceed the wage rate.

Marginal Resource (Labor) Cost Will Exceed the Wage Rate When