The supply curve of labor to the firm buying factors in a perfectly competitive factor market is the marginal factor cost curve.

Question

Quizplus · Accepted Answer

In a perfectly competitive factor market, the firm is a price taker and faces a horizontal factor supply curve. The marginal factor cost (MFC) curve represents the additional cost incurred by the firm for employing an additional unit of factor input. The MFC curve is equal to the supply curve of labor to the firm in a perfectly competitive factor market. Therefore, the statement is true.

The Supply Curve of Labor to the Firm Buying Factors