When a labor market is imperfect due to market power by a firm, the result in that market typically is _____ their marginal value.

Question

Quizplus · Accepted Answer

In an imperfect labor market where a firm has market power, it tends to hire fewer workers at a wage below their marginal value. This is because the firm can exert its power to set wages lower than in a competitive market, where wages would equal the marginal product of labor.

When a Labor Market Is Imperfect Due to Market Power