A perfectly competitive input market:
A)assumes there are no intermediate goods.
B)has all firms as price takers and all inputs as price takers.
C)has all firms as price searchers, but all inputs as price takers.
D)is where the input price equals the output price.

Question

Quizplus · Accepted Answer

A perfectly competitive input market has all firms and inputs as price takers, meaning that no one has market power to influence the price. This ensures that resources are allocated efficiently and results in the lowest possible cost of production. The other options are incorrect because intermediate goods may or may not be present in a perfectly competitive input market, firms cannot be price searchers in a perfectly competitive market, and the input price does not necessarily have to equal the output price.

A Perfectly Competitive Input Market