The marginal productivity theory of income distribution states that
A)as more and more units of labour are added to a fixed quantity of capital, eventually labour's contribution to a firm's income will decrease.
B)income distribution is determined by the marginal productivity of the factors of production that individuals own.
C)factors of production in short supply command higher prices than those available in abundant quantities.
D)capital owners receive the bulk of a nation's income because capital-intensive production generates productivity gains.

Question

Quizplus · Accepted Answer

The marginal productivity theory of income distribution states that income distribution is determined by the marginal productivity of the factors of production that individuals own. In other words, individuals who own factors of production that are more productive will receive a larger share of the national income. This theory suggests that in a competitive market, wages and other factor prices will adjust until they are equal to the marginal productivity of the factors of production.

The Marginal Productivity Theory of Income Distribution States That