If an input is sold in a perfectly competitive market,its price is equal to its:
A) average cost.
B) opportunity cost.
C) cost-benefit ratio.
D) cash flow premium.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the price of an input is determined by supply and demand. The seller cannot influence the price and must accept the prevailing market price. Therefore, the price of the input is equal to its opportunity cost, which is the value of the next best alternative foregone by selling it in the market. The other options (average cost, cost-benefit ratio, cash flow premium) are not relevant for determining the price in a perfectly competitive market.

If an Input Is Sold in a Perfectly Competitive Market,its