If Both Input and Output Markets Are Competitive, and Firms

question 55

Multiple Choice

If both input and output markets are competitive, and firms are profit maximising, then in equilibrium each factor of production earns

• A) an amount equal to the price of output times total output.
• B) the amount allocated by the political process.
• C) an equal share of output.
• D) the value of its marginal product.

---

Definitions:

Current Year

The present calendar year in which a transaction or event occurs or is being discussed.

Laspeyres Price Index

An economic measure that calculates the change in the price of a basket of goods and services, using the quantities purchased in the base year as weights.

Per Capita Income

The average income earned per person in a given area or country.

Revealed Preferences

The concept that consumers' choices reveal their preferences and that these choices can be used to infer the utility they derive from different options.