That the perfectly competitive firm will pick a combination of inputs where the ratio of each input's marginal product to its price is equal follows from
A)the need to use inputs in fixed proportions
B)the backward bending supply curve of labour
C)cost minimization
D)the attempt to achieve a target rate of return

Question

Quizplus · Accepted Answer

This principle follows from cost minimization, where firms aim to produce a given level of output at the lowest possible cost. By equating the ratio of the marginal product of each input to its price across all inputs, firms ensure they are using their resources in the most efficient way possible, minimizing costs.

That the Perfectly Competitive Firm Will Pick a Combination of Inputs