Economics · Market Structures

Which of the following is NOT a characteristic of the factor pricing model in a perfectly competitive labor market?

Verified Solution4 OptionsUpdated: October 2026👁️1 View

1The labor supply curve faced by an individual firm is perfectly elastic at the equilibrium wage.
2Firms are wage takers and cannot individually influence the market wage rate.
3Wages are set above the equilibrium wage by individual firms to attract better talent.✓
4The marginal productivity of labor determines the wage rate.

Correct answer

Wages are set above the equilibrium wage by individual firms to attract better talent.

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