does it just shift to the left?If the cost of workers increase, how does the marginal cost change?The total cost function is a function of the cost of production and output. The increase in number of workers will result in an increase in output defied by the production function. The increase in wage rate will then cause the shift of total cost curve upward because variable cost= number of workers x wage rate,and so the marginal cost will shift to the right. May I remind you that there is no shift of production function and marginal product, but only the total cost curve. So the marginal cost cuve will have the same slope.The shift will effect the profit maximization where value of marginal product=wage rate.If the cost of workers increase, how does the marginal cost change?Edit: Argh, nevermind. Increase in variable costs is associated with increase in labor, hence we are moving along the variable cost / total cost curve from left to right. So marginal cost will depend on whether or not you are in the range of diminishing marginal returns. When you are not in the range of DMR, MC will decrease. When you are in the range of DMR, MC will increase. At the inflection point, MC is constant.
On the other hand, if there is no increase in labor, but merely a pay raise for every worker, then total cost would shift upwards, and MC would stay constant.
