In perfect competition: A) the supply curve of labor to the firm is a horizontal line. B) MFC_L is greater than the price of labor. C) MFC_L is less than the price of labor. D) MRP_L equals the price of the good.

Question

Quizplus · Accepted Answer

In perfect competition, the firm is a price taker and the supply curve of labor to the firm is a horizontal line, indicating that the firm can hire unlimited workers at the market wage rate. Choice B and C are incorrect because MFC_L (marginal factor cost of producing an additional unit of output) is not relevant to the wage rate in perfect competition. Choice D is incorrect because MRP_L (marginal revenue product of labor) is not equal to the price of the good in perfect competition.

In Perfect Competition