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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) equilibrium wage rate includes other costs,such as employee benefits,that have to be subtracted from the $70 000 salary.
C) equilibrium wage rate includes other costs,such as employee benefits,that have to be added to the $70 000 salary.
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) equilibrium wage rate includes other costs,such as employee benefits,that have to be subtracted from the $70 000 salary. 
C) equilibrium wage rate includes other costs,such as employee benefits,that have to be added to the $70 000 salary. 
D) value of the marginal product of the last machinist hired is equal to the average of all machinists employed.

Quizplus · Accepted Answer

The $70,000 salary paid to highly skilled senior machinists only represents their base wage and does not include employee benefits. Since benefits are considered a cost to the employer, they need to be added to the base wage to determine the true equilibrium wage rate for the average-skilled machinist. Therefore, choice C is the best answer.

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