A firm's marginal resource cost curve is _____
A)horizontal only if the firm is a price taker in the product market.
B)horizontal only if the firm is a price taker in the resource market.
C)vertical only if the firm is a price taker in the product market.
D)vertical only if the firm is a price taker in the resource market.
E)always downward sloping whether the firm sells its product in a competitive market or a market with some market power.

Question

Quizplus · Accepted Answer

Marginal resource cost is the change in total cost when an additional unit of a resource is added. The marginal resource cost curve is vertical if the firm is a price taker in the resource market (meaning it has no market power in buying resources). This is because the price of the resource will not be affected by the quantity purchased. If the firm has some market power in buying resources, the marginal resource cost curve will be upward sloping. Therefore, option A, C, D, and E are incorrect.

A Firm's Marginal Resource Cost Curve Is _____