The marginal cost of a productive resource is equal to the price of the resource if a firm is
A) a price taker in the output market.
B) a price taker in the resource market.
C) able to influence the price of the product by producing more or less of it.
D) able to influence the price of the factor by buying more or less of it.

Question

Quizplus · Accepted Answer

The marginal cost of a productive resource is equal to the price of the resource in a perfectly competitive market, where firms are price takers in the resource market. This is because in a perfectly competitive market, the price of a resource is determined by the intersection of the supply and demand curves, and each firm takes the price as given. Therefore, the firm's decision to use an additional unit of the resource (i.e. the marginal cost) is equal to the market price of the resource itself.

The Marginal Cost of a Productive Resource Is Equal to the Price