A firm in a competitive input market can

Question

Quizplus · Accepted Answer

In a competitive input market, firms can hire workers at the going wage, which is determined by the forces of supply and demand. The firm cannot hire additional workers at lower wages because this would create a surplus of workers, causing the wage rate to decrease. Similarly, the firm cannot hire additional workers only by raising wages because this would increase the firm's costs without any guarantee of finding additional workers willing to work at the higher wage rate. Finally, while there may be a search process involved in finding new workers, this does not limit the firm's ability to hire workers at the going wage rate.

A Firm in a Competitive Input Market Can