Suppose the firm decided to hire NC workers, the amount which would be hired in a competitive market at the competitive wage, WC.

    The MFC curve gives the marginal cost of hiring another worker and the D=MRP curve gives the marginal revenue gained from hiring another worker. For every worker hired beyond NM, MFC > MRP. In other words the added costs of hiring beyone NM is greater than the added benefit. The shaded area indicates the loss which results from this over hiring.

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