Suppose that a firm hiring labor in a perfectly competitive factor market increases the quantity of labor from 20 workers to 21 workers.If the marginal factor cost for the twenty-first worker is $10, the market wage is:

Question

Quizplus · Accepted Answer

In a perfectly competitive factor market, the firm faces a horizontal supply curve for labor, which is the market wage. Therefore, to hire one extra worker, the firm has to pay the market wage. In this case, the marginal factor cost (MFC) of hiring the twenty-first worker is $10, which means that the firm has to pay an additional $10 to hire one extra worker. Thus, the market wage for this firm is $10. Option A is the correct answer.

Suppose That a Firm Hiring Labor in a Perfectly Competitive