In a perfectly competitive labor market, the price of labor is equal to the marginal factor cost of labor.

Question

Quizplus · Accepted Answer

In a perfectly competitive labor market, the price of labor is determined by the intersection of the labor supply and labor demand curves. At that intersection, the price of labor is equal to the marginal factor cost of labor. This is because in a competitive market, firms are price-takers and must pay the market price for labor, which is equal to the marginal cost of hiring an additional unit of labor. Therefore, the statement is true.

In a Perfectly Competitive Labor Market, the Price of Labor