Figure 71.2

Equilibrium in the Labor Market

Equilibrium in the Labor MarketThe market labor demand curve is the horizontal sum of the individual labor demand curves of all producers. Here the equilibrium wage rate is W*, the equilibrium employment level is L*, and every producer hires labor up to the point at which MRPL = W*. So labor is paid its equilibrium marginal revenue product, that is, the marginal revenue product of the last worker hired in the labor market as a whole.