Use the following to answer questions :
Figure: Equilibrium in the Labour Market
-According to the marginal productivity theory of income distribution,if a unit of labour is paid more than a unit of capital,it is because,at the equilibrium quantity of each factor,the value of the _____ product of labour is _____ product of capital.
A) marginal;greater than the marginal
B) marginal;less than the marginal
C) average;greater than the average
D) average;less than the average

Question

Use the following to answer questions :
Figure: Equilibrium in the Labour Market 
-According to the marginal productivity theory of income distribution,if a unit of labour is paid more than a unit of capital,it is because,at the equilibrium quantity of each factor,the value of the _____ product of labour is _____ product of capital.
A) marginal;greater than the marginal 
B) marginal;less than the marginal 
C) average;greater than the average 
D) average;less than the average

Quizplus · Accepted Answer

According to the marginal productivity theory of income distribution, the factor (labor or capital) is paid according to its marginal productivity. At the equilibrium quantity of each factor, the marginal product of labor should be equal to the marginal product of capital. Therefore, if a unit of labor is paid more than a unit of capital, it is because the value of the marginal product of labor is greater than the marginal product of capital. Therefore, the best choice is A.

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