According to the neoclassical theory of distribution, total output is divided between payments to capital and payments to labor depending on their:
A) supply.
B) equilibrium growth rates.
C) relative political power.
D) marginal productivities.

Question

Quizplus · Accepted Answer

According to the neoclassical theory of distribution, total output is divided between payments to capital and payments to labor depending on their marginal productivities. Marginal productivity theory states that in a free market economy, each factor of production (labor and capital) is compensated according to the amount of output that it contributes to the production process. Therefore, the more productive an input is, the more it is paid.

According to the Neoclassical Theory of Distribution, Total Output Is