If the firm operates in a competitive labor market,
A) it faces a positively sloped labor supply curve, and the marginal expense of labor is less than the market wage.
B) it faces a horizontal labor supply curve, and the marginal expense of labor equals the market wage.
C) it must compete against other employers by offering a generous compensation package.
D) it faces a vertical labor supply curve, and it competes against other employers by moving to the lowest attainable point on the labor supply curve.

Question

Quizplus · Accepted Answer

In a competitive labor market, firms face a horizontal labor supply curve because they are wage takers, meaning they can hire as many workers as they want at the market wage. Therefore, the marginal expense of labor equals the market wage.

If the Firm Operates in a Competitive Labor Market