If a firm hires a resource in a perfectly competitive resource market,then _____
A)the firm is a price maker in the product market.
B)the firm has some power in the product market.
C)the firm faces a horizontal marginal resource cost curve.
D)the firm faces an upward-sloping marginal resource cost curve.
E)the firm faces a downward-sloping marginal resource cost curve.

Question

Quizplus · Accepted Answer

In a perfectly competitive resource market, the firm faces a horizontal supply curve for the resource it wants to hire. Therefore, the marginal resource cost curve (which indicates the additional cost of hiring one more unit of the resource) is also horizontal, as it is the same as the supply curve. This means that the firm can hire as much of the resource as it wants at the market price, without affecting that price. However, this does not imply anything about the firm's power or behavior in the product market, which depends on other factors such as the elasticity of demand for its product.

If a Firm Hires a Resource in a Perfectly Competitive