factor prices
factor pricesThe prices of the services of factors of production. For labour of various types the factor price is the appropriate wage rate; for land, the rent paid; and for capital, the interest rate. The purchase prices of land and capital goods are not factor prices in this sense. In competitive equilibrium, factor prices would be equal to the marginal product of each factor. In fact not all goods or factor markets are competitive, and the prices of some factors are fixed for some time in advance by contracts. This makes the relation between factor prices and marginal products less clear-cut. Any residual profits after factors have been paid can be argued to be the reward of either entrepreneurship or monopoly; these are hard to distinguish.
[The entire page is 130 words long]
Join eNotes
Over 3,500 study guides, question and answer forums, literature criticism, reference content, and much more!
Oxford University Press Titles
