MC(L: Marginal Factor Cost(MFC) Marginal Factor Cost(MFC)边际要素成本 The cost of using an additional unit of an input MFC △C(Q)△TWC()△L △L △L
21 MC(L): Marginal Factor Cost (MFC) Marginal Factor Cost (MFC)(边际要素成本) The cost of using an additional unit of an input L wL L TVC Q L TC Q MFCL ∆∆ = ∆ ∆ = ∆ ∆ = ( ) ( )
Marginal Factor Cost Industry labor market The firm co o S,= MFC Labor Input (workers per week) Labor Input (workers per week)
22 Marginal Factor Cost Labor Input (workers per week) Wage The firm D L S L Labor Input (workers per week) W0 SL = MFC Industry labor market W0 L1
MCL: Marginal Factor Cost(MFC) a In a perfectly competitive labor market The market determines the wage The individual employer is a wage taker All workers are hired for the same wage △vL MFC= △L So MFC wage
23 MCL: Marginal Factor Cost (MFC) In a perfectly competitive labor market: The market determines the wage The individual employer is a wage taker All workers are hired for the same wage So MFC = wage 0 0 w L w L MFC = ∆ ∆ =
How many workers to hire? To maximize profit, the firm hires workers up to the point where the vmp, is equal to the cost of the labour i e. market wage VMP E WAGE The value-of-marginal-product curve is the labour demand curve for a competitive profit maximizing firm 24
24 How many workers to hire? To maximize profit, the firm hires workers up to the point where the VMPL is equal to the cost of the labour, i.e. market wage. VMP L = WAGE The value-of-marginal-product curve is the labour demand curve for a competitive, profitmaximizing firm
How Many Workers Do I Hire? vimP WAGE Market Wage VMPL Curve Quantity of labour
25 “How Many Workers Do I Hire?” VMP L & WAGE Quantity of labour Market Wage VMP L Curve w 0