Prices in factor markets are primarily determined by:
A)government regulation.
B)big business collusion.
C)the interaction of business supply with household demand in the factor markets.
D)the interaction of household supply with business demand in the factor markets.
E)none of the above.

Question

Quizplus · Accepted Answer

Prices in factor markets, such as labor and capital markets, are primarily determined by the interaction of household supply with business demand. Businesses demand factors of production such as labor and capital to produce goods and services, while households supply these factors in exchange for payment. The price of factors of production is then determined by the intersection of the supply and demand curves in the factor markets. Government regulation and big business collusion may have some influence on prices but are not the primary determinants.

Prices in Factor Markets Are Primarily Determined By