Asked by Allison Brown on Jul 04, 2024
Verified
When the factor market is purely competitive, the firm's average expenditure curve for a factor of production is:
A) upward sloping and to the right of the marginal expenditure curve.
B) downward sloping and to the right of the marginal expenditure curve.
C) identical to the marginal expenditure curve.
D) downward sloping and to the left of the marginal expenditure curve.
Marginal Expenditure Curve
Curve describing the additional cost of purchasing one additional unit of a good.
Factor of Production
An economic resource that is used to produce goods and services, including land, labor, capital, and entrepreneurship.
Average Expenditure Curve
Supply curve representing the price per unit that a firm pays for a good.
- Comprehend how alterations in input costs affect the strategy of firms to maximize profits within a competitive market environment.
Verified Answer
ZK
Zybrea KnightJul 08, 2024
Final Answer :
C
Explanation :
In a purely competitive factor market, the firm is a price taker and the price of the factor is determined by the market. Therefore, both the average expenditure curve and the marginal expenditure curve are horizontal and identical. This means that the firm pays the same price for each additional unit of the factor they hire, and the total expenditure increases in a straight line.
Learning Objectives
- Comprehend how alterations in input costs affect the strategy of firms to maximize profits within a competitive market environment.
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