The fact that monopoly and monopsony exist in resource markets means that
A) the marginal productivity theory of income distribution is valid.
B) resource prices do not always measure contributions to output.
C) the resulting income distribution is ethically correct.
D) income shares do not exhaust the total output.

Question

Quizplus · Accepted Answer

The existence of monopoly and monopsony in resource markets suggests that resource owners may not receive prices that accurately reflect their contributions to output. Therefore, resource prices do not always measure contributions to output. This challenges the validity of the marginal productivity theory of income distribution (option A) and the ethical correctness of resulting income distribution (option C). Furthermore, the fact that income shares do not exhaust the total output means that there may be unearned profits or losses for owners and users of resources.

The Fact That Monopoly and Monopsony Exist in Resource Markets