Heterogeneous inputs in a perfectly competitive market will cause the industry to face ________ costs because as the firm produces a larger quantity, it is forced to use ________ productive inputs.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms have no market power and face a horizontal demand curve. Heterogeneous inputs means that some inputs are more productive than others. As the output increases, the firm will use more of the less productive inputs, leading to increasing costs. Therefore, the correct answer is A, which indicates that costs will increase and the firm will use less productive inputs.

Heterogeneous Inputs in a Perfectly Competitive Market Will Cause the Industry