For a Firm Buying Factors of Production in a Perfectly

question 153

Multiple Choice

For a firm buying factors of production in a perfectly competitive factor market:

• A) factors are hired where marginal revenue product is less than marginal factor cost.
• B) its marginal revenue product curve for a factor is its factor demand curve.
• C) the price of a factor will be greater than its marginal revenue product.
• D) the price of a factor will be less than its marginal factor cost.

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Definitions:

Bargaining

The process of negotiating the terms of a transaction or agreement between parties with differing interests.

Coase Theorem

An economic theory that suggests that if property rights are well-defined and transaction costs are minimal, voluntary negotiations will lead to the efficient resolution of disputes regarding resource allocation.

Cost Of Bargaining

The expenses, in terms of both time and resources, that are involved in reaching an agreement in a bargaining process.

Property Rights

Legal principles that define the ownership and use of resources, including the ability to transfer, exclude, and derive benefits from them.