Google
Saturday 
February 22, 2020 

AmosWEB means Economics with a Touch of Whimsy!

AmosWEBWEB*pediaGLOSS*aramaECON*worldCLASS*portalQUIZ*tasticPED GuideXtra CrediteTutorA*PLS
SHORT-RUN SUPPLY CURVE, MONOPOLY: Market control by a monopoly firm means that it does not have a supply relation between the quantity of output produced and the price. By way of comparison a perfectly competitive firm does have a short-run supply curve. Market control by a monopoly means that it price is NOT equal to marginal revenue, and thus it does NOT equate marginal cost and price. As such, a monopoly firm does not move along it's marginal cost curve. A monopoly does not necessarily supply larger quantities at higher prices or smaller quantities at lower prices.

Visit the GLOSS*arama


MARGINAL FACTOR COST CURVE, PERFECT COMPETITION:

A curve that graphically represents the relation between marginal factor cost incurred by a perfectly competitive firm for hiring an input and the quantity of input employed. A profit-maximizing perfectly competitive firm hires the quantity of input found at the intersection of the marginal factor cost curve and marginal revenue product curve. The marginal factor cost curve for a perfectly competitive firm with no market control is horizontal.
Perfect competition is a market structure with a large number of small participants (buyers and sellers). The good exchanged in the market is identical, regardless of who sells or who buys. Participants have perfect knowledge and perfect mobility into and out of the market. These conditions mean perfectly competitive buyers are price takers, they have no market control and must pay the going market price for all good sold.

The marginal factor cost curve reflects the degree of market control held by a firm. For a perfectly competitive firm with no market control, the marginal factor cost curve is a horizontal line. For firms with more market control, especially monopsony, the marginal factor cost curve is positively sloped and lies above the average factor cost curve.

Marginal Factor Cost Curve,
Perfect Competition
Marginal Factor Cost Curve, Perfect Competition
Marginal factor cost is commonly represented by a marginal factor cost curve, such as the one labeled MFC and displayed in the exhibit to the right. This particular marginal factor cost curve is that for labor hired by Maggie's Macrame Shoppe. Maggie's Macrame Shoppe is one of thousands of small retail stores in the greater Shady Valley metropolitan area that hires labor with identical skills. As such, Maggie pays the going wage for labor.

The vertical axis measures marginal factor cost and the horizontal axis measures the quantity of input (workers). Although quantity on this particular graph stops at 10 workers, the nature of perfect competition indicates it could easily go higher.

First and foremost, the marginal factor cost curve is horizontal at the going factor price of $10. This indicates that if Maggie hires the first worker, then her total factor cost increases by $10. Alternatively, if she hires the tenth worker, then her total factor cost increases by $10. Should she hire a hundredth worker, then she might move well beyond the graph, but her total factor cost increases by $10.

The "curve" is actually a "straight line" because Maggie is a price taker in the labor market. She pays $10 for each worker whether she hires 1 worker or 10 workers or 100 workers. Her extra factor cost of hiring an extra worker is always $10. The constant price is what makes Maggie's marginal factor cost curve a straight line, and which indicates that Maggie has no market control.

<= MARGINAL FACTOR COST CURVE, MONOPSONYMARGINAL FACTOR COST, MONOPSONY =>


Recommended Citation:

MARGINAL FACTOR COST CURVE, PERFECT COMPETITION, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2020. [Accessed: February 22, 2020].


Check Out These Related Terms...

     | marginal factor cost | marginal factor cost curve | marginal factor cost curve, monopsony | total factor cost curve | average factor cost curve | total cost | total product | marginal factor cost, perfect competition | marginal factor cost, monopsony |


Or For A Little Background...

     | market structures | perfect competition | perfect competition characteristics | perfect competition and demand | monopsony | oligopsony | monopsonistic competition | supply | supply price | law of supply | efficiency |


And For Further Study...

     | factor market analysis | short-run production analysis | marginal factor cost and marginal factor cost | factor supply | factor supply curve | supply by a firm | supply to a firm | mobility |


Search Again?

Back to the WEB*pedia


APLS

ORANGE REBELOON
[What's This?]

Today, you are likely to spend a great deal of time searching the newspaper want ads hoping to buy either a microwave over that won't burn your popcorn or a T-shirt commemorating the first day of winter. Be on the lookout for neighborhood pets, especially belligerent parrots.
Your Complete Scope

This isn't me! What am I?

Helping spur the U.S. industrial revolution, Thomas Edison patented nearly 1300 inventions, 300 of which came out of his Menlo Park "invention factory" during a four-year period.
"Be willing to have it so. Acceptance of what has happened is the first step to overcoming the consequences of any misfortune."

-- William James, Psychologist

NAFTA
North America Free Trade Agreement
A PEDestrian's Guide
Xtra Credit
Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.

User Feedback



| AmosWEB | WEB*pedia | GLOSS*arama | ECON*world | CLASS*portal | QUIZ*tastic | PED Guide | Xtra Credit | eTutor | A*PLS |
| About Us | Terms of Use | Privacy Statement |

Thanks for visiting AmosWEB
Copyright ©2000-2020 AmosWEB*LLC
Send comments or questions to: WebMaster