If a firm hires a resource in a perfectly competitive resource market, then:
A)the firm is a price taker 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

If a firm hires a resource in a perfectly competitive resource market, then:​
A)the firm is a price taker 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.

Quizplus · Accepted Answer

In a perfectly competitive resource market, firms are price takers and face a horizontal supply curve of resources. Therefore, the marginal resource cost curve is also horizontal for the firm. This means that the firm can hire additional units of the resource at a constant cost, and there is no need to pay a higher price to attract more resources.

If a Firm Hires a Resource in a Perfectly Competitive