Question

Discuss how factor price is determined when there is perfect competition in the product market and monopoly in the factor market?​

Answer 1

Answer:

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Answer 2

Determination of Factor Price Under Imperfect Competition (or Monopoly)!

Determination of Factor Price Under Imperfect Competition (or Monopoly)!The price of a factor of production is determined when there prevails perfect competition both in the product and factor markets. Before the theories of imperfect competition and monopolistic competition were introduced in economic theory no distinction was made between value of marginal product (VMP) and marginal revenue product (MRP).

Determination of Factor Price Under Imperfect Competition (or Monopoly)!The price of a factor of production is determined when there prevails perfect competition both in the product and factor markets. Before the theories of imperfect competition and monopolistic competition were introduced in economic theory no distinction was made between value of marginal product (VMP) and marginal revenue product (MRP).That when there is imperfect competition (i.e. monopoly, oligopoly or monopolistic competi­tion) in the product market, marginal revenue differs from the price of the product. As a result, under conditions of imperfect competition in the product market, marginal revenue product (MRP) of the factor differs from value of the marginal product (VMP).

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