A firm's marginal cost curve in a perfectly competitive product market is the same as its ________ curve. Similarly, a firm's marginal revenue product curve in a perfectly competitive labor market is the same as its ________ curve.
A) demand; supply
B) supply; demand
C) demand; demand
D) supply; supply

Question

Quizplus · Accepted Answer

In a perfectly competitive product market, a firm's marginal cost curve above the shutdown point acts as its supply curve because it decides the quantity of goods the firm is willing to supply at different prices. In a perfectly competitive labor market, a firm's marginal revenue product curve is its demand curve for labor, as it shows the additional revenue generated from hiring one more unit of labor, indicating how much the firm is willing to pay for different quantities of labor.

A Firm's Marginal Cost Curve in a Perfectly Competitive Product