A firm increases its purchases of a factor of production in a perfectly competitive market from 10 units to 11 units.If the market price of the factor is $10 per unit, the marginal factor cost for the tenth unit is:
A) $10.
B) $20.
C) $100.
D) $110.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the firm is a price taker and the market price of the factor is $10 per unit, so the marginal factor cost for each additional unit is also $10. Therefore, the marginal factor cost for the tenth unit is also $10. The increase in the number of units purchased from 10 to 11 is irrelevant to the marginal factor cost of the tenth unit.

A Firm Increases Its Purchases of a Factor of Production