When each factor is paid an amount equal to the value of the marginal product of the last unit of that factor employed in the factor market as a whole,this is:
A)the marginal productivity theory of income distribution.
B)diminishing marginal product.
C)the factor distribution of income.
D)the efficiency wage model.

Question

Quizplus · Accepted Answer

This describes the marginal productivity theory of income distribution, which suggests that each factor of production (such as land, labor, and capital) earns a share of the income equal to the value of the marginal product they contribute to production. This means that if the last unit of labor added to a production process increases output by $10, then the worker should be paid $10 for their contribution.

When Each Factor Is Paid an Amount Equal to the Value