According to the neoclassical theory of distribution, if firms are competitive and subject to constant returns to scale, total income in the economy is distributed:
A)only to the labour used in production.
B)partly between labour and capital used in production, with the surplus going to the owners of the firm as profits.
C)equally between the labour and capital used in production.
D)between the labour and capital used in production, according to their marginal productivities.

Question

Quizplus · Accepted Answer

In neoclassical theory, under competitive markets and constant returns to scale, income is distributed based on the marginal productivity of labor and capital.

According to the Neoclassical Theory of Distribution, If Firms Are