Question
Why is the supply curve horizontal for a factor price taker, yet the industry supply curve is upward sloping? A) A firm will buy a
Why is the supply curve horizontal for a factor price taker, yet the industry supply curve is upward sloping?
A) A firm will buy a factor as long as the marginal factor cost is less than the marginal revenue product, resulting in a horizontal supply curve. For the industry, the marginal factor cost is greater than the marginal revenue product, so the curve is upward sloping.
B) The supply curve is horizontal for a factor price searcher, not a factor price taker.
C)The marginal physical product associated with the product is insignificant for the firm; therefore, the supply curve is horizontal. For the industry, however, the diminishing marginal product is inversely related to the supply curve.
D)Each firm buys a relatively small portion of a factor; therefore, it takes the factor at whatever price is offered. For the industry, however, higher factor prices must be offered to entice workers from other industries.
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