Marginal Cost of Inputs and Economic Rent

In cases where inputs are in high supply at the current market price and the market for inputs is competitive, the marginal cost of an input is roughly equal to the actual cost of acquiring it. So, in such a situation, the principle described earlier can be expressed in terms of comparing the marginal revenue product to price to acquire the input(s). If the number of accountants seeking a job were fairly substantial and competitive, the actual per unit costs involved in hiring one more accountant would be the marginal cost.

If the market of inputs is less competitive, a firm may have to pay a little higher than the prevailing market price to acquire more units because they will need to be hired away from ...

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