Question

Oscar's Flower Shop maximizes profits by hiring four workers in a perfectly competitive labor market. The workers and their value of the marginal product of labor are Noe, $40; Barbara, $35; Calvin, $27; and Diana, $15. According to the marginal productivity theoryof income distribution, which of the following statements is TRUE?

Answer 1

Answer:

In equilibrium, each worker is paid his or her value of the marginal product of labor.

Explanation:

Here are the missing option of the question:

• In equilibrium, each worker is paid his or her value of the marginal product of labor.
• Each worker is paid a wage equal to the highest value of the marginal product of labor(i.e., $40)
• Each worker is paid $15.
• We need to know the product price before we can figure out the wage rate.

As per marginal theory of productivity of income distribution, Income of each factor production is equal to its marginal productivity.

Marginal productivity is one additional unit of production by one unit additional unit of factor, which bring changes in total production. Firm hire labor till marginal revenue product of labor is more than wage rate of labor. The point at which Marginal revenue product of labor is equal to wage rate labor is the labor market equilibrium.