A temporary price differential in resource markets is
A)eliminated by resource movements
B)caused by a failure of firms to maximize profits
C)eliminated by resources moving from highly-valued uses to lower-valued uses
D)caused by Congress increasing the federal minimum wage
E)a result of firms using the MRP = MRC rule in hiring resources

Question

Quizplus · Accepted Answer

Temporary price differentials in resource markets arise because of differences in demand and supply for resources. If the price of a particular resource is higher in one location than in another, businesses will have an incentive to move resources from the lower-priced area to the higher-priced area. This will eventually lead to an equilibration of prices between the two areas. Therefore, temporary price differentials in resource markets are eliminated by resource movements.

A Temporary Price Differential in Resource Markets Is