In a perfectly competitive factor market, a firm faces a(n):

Question

Quizplus · Accepted Answer

In a perfectly competitive factor market, each factor has many sellers and buyers, and therefore, the price of each factor is determined by the market. The firm, as a buyer, must accept the market-determined price for each factor it hires. Therefore, choice A is the correct answer. Choices B, C, and D are incorrect because they do not describe the characteristics of a perfectly competitive factor market. In a perfectly elastic demand curve, the firm is the only buyer of the factor, which is not the case in a perfectly competitive market. The supply curve in a perfectly competitive factor market is perfectly elastic, not inelastic. The demand curve for the firm's output is downward-sloping, not upward-sloping.

In a Perfectly Competitive Factor Market, a Firm Faces A(n)