Suppose a minimum wage of WMin is imposed in a monopsony factor market. By law the firm can't hire workers at a wage below WMin so the effective labor supply curve and MFC is WMin as long as the firm hires fewer than LMin workers (LMin is the number of workers who would like to work at wage WMin). If the firm were to hire more than LMin workers it would have to pay more than the minimum wage to increase hiring. For this reason, MFC increases beyond that point.

Copyright © 1995-2004, Inc. - All Rights Reserved