For a firm buying factors of production in a perfectly competitive factor market:
A) factors are hired where marginal revenue product is equal to marginal factor cost.
B) its marginal revenue product curve for a factor is its factor supply curve.
C) the price of a factor will be greater than its marginal revenue product.
D) the price of a factor will be less than its marginal factor cost.

Question

Quizplus · Accepted Answer

In a perfectly competitive factor market, a firm will hire factors where the marginal revenue product is equal to the marginal factor cost, which is the profit-maximizing condition. The marginal revenue product curve and factor supply curve are not necessarily the same. The price of a factor can be equal to its marginal revenue product in a perfectly competitive market.

For a Firm Buying Factors of Production in a Perfectly