If Factor Markets Are Competitive, a Profit Maximizing Firm Should

question 45

Multiple Choice

If factor markets are competitive, a profit maximizing firm should buy inputs where MRP is

• A)inelastic.
• B)elastic.
• C)equal to the output price.
• D)equal to the input price.

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Definitions:

Interest Rates

The cost of borrowing money, expressed as a percentage, which lenders charge borrowers for using their money for a period of time.

Price Ceiling

A government-imposed limit on how high a price is charged for a product, meant to protect consumers from conditions that could make commodities prohibitively expensive.

Shortage

A market condition where the demand for a product exceeds its supply at a particular price.

Surplus

is a situation in which the quantity of a good or service available exceeds the quantity demanded at the current price.