15.1 Factor Markets
Virtually all firms rely on factor markets for at least some inputs, such as labor. The firms that buy factors may be competitive price takers or noncompetitive price setters, such as a monopsony firm. Competitive, monopolistically competitive, oligopolistic, and monopolistic firms sell factors.
We start with competitive factor markets. Factor markets are competitive if they have many small sellers and buyers. FloraHolland’s daily flower auction in Amsterdam typifies such a competitive market with many sellers and buyers. The sellers supply inputs—flowers in bulk—to buyers, who sell outputs—trimmed flowers in vases and wrapped bouquets—at retail to final customers.
Our earlier analysis of the competitive supply curve applies ...
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