The marginal productivity theory of income distribution says that:
A)each factor is paid the equilibrium value of the output generated by the last unit of that factor employed in the factor market as a whole.
B)each factor is paid an amount greater than the value of the output generated by the last unit of that factor employed in the factor market as a whole.
C)each factor is paid an amount less than the value of the output generated by the last unit of that factor employed in the factor market as a whole.
D)the payment to each factor does not correspond to the marginal product of the factor.

Question

Quizplus · Accepted Answer

The marginal productivity theory of income distribution states that each factor (labor, capital, land, etc.) is paid the equilibrium value of the output generated by the last unit of that factor employed in the whole factor market. This means that each factor is paid according to its marginal product, or the additional output that is generated by adding one more unit of that factor. Therefore, choice A is the correct answer.

The Marginal Productivity Theory of Income Distribution Says That