Suppose that a firm hiring labor in a perfectly competitive factor market increases the quantity of labor from 10 workers to 11 workers.If the market wage is $20 per worker, the marginal factor cost for the eleventh worker is:

Question

Quizplus · Accepted Answer

In a perfectly competitive factor market, the market wage rate is constant and is equal to both the marginal factor cost and the average factor cost. Therefore, when the firm hires one additional worker, it must pay the market wage rate of $20 to all workers. Thus, the marginal factor cost of the eleventh worker is $20, which is the same as the market wage rate. The correct answer is C) $20.

Suppose That a Firm Hiring Labor in a Perfectly Competitive