If there is imperfect competition in the product market only, then the firm's demand for labor is given by the marginal revenue product curve for labor.

Question

Quizplus · Accepted Answer

In a market with imperfect competition, a firm has some control over the price of its product. Hence, the marginal revenue product curve for labor takes into account the imperfectly competitive nature of the market and reflects the additional revenue that the firm earns from hiring another unit of labor. Therefore, the firm's demand for labor is given by the marginal revenue product curve for labor.

If There Is Imperfect Competition in the Product Market Only