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Figure: Equilibrium in the Labour Market
-At Hamill Manufacturing of Alberta,highly skilled senior machinists are paid $70 000,excluding benefits,but the average-skilled machinist generates approximately $137 000 in value added.This difference is due to the fact that the:
A) marginal productivity theory of income distribution does not apply in this case.
B) value of the marginal product of the last machinist hired is less than the average of all machinists employed.
C) value of the marginal product of the last machinist hired is greater than the average of all machinists employed.
D) value of the marginal product of the last machinist hired is equal to the average of all machinists employed.

Question

Use the following to answer questions :
Figure: Equilibrium in the Labour Market 
-At Hamill Manufacturing of Alberta,highly skilled senior machinists are paid $70 000,excluding benefits,but the average-skilled machinist generates approximately $137 000 in value added.This difference is due to the fact that the:
A) marginal productivity theory of income distribution does not apply in this case. 
B) value of the marginal product of the last machinist hired is less than the average of all machinists employed. 
C) value of the marginal product of the last machinist hired is greater than the average of all machinists employed. 
D) value of the marginal product of the last machinist hired is equal to the average of all machinists employed.

Quizplus · Accepted Answer

The value of the marginal product of the last machinist hired is less than the average of all machinists employed, which explains why the average value added is higher than the salary paid.

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