According to the Neoclassical Theory of Distribution, the Wages Paid

question 322

Multiple Choice

According to the neoclassical theory of distribution, the wages paid to workers

• A)reflect the market prices of the goods those workers produce.
• B)reflect the degree of market power held by the firms that pay those wages.
• C)fail to reflect those workers' opportunity costs of leisure.
• D)are unrelated to the forces of supply and demand.

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Definitions:

Productive Efficiency

A situation where goods and services are produced at the lowest possible cost and resources are utilized most effectively.

Allocative Efficiency

A state of resource allocation where goods and services are distributed according to consumer preferences and in a way that maximizes social welfare.

Marginal Cost

The uptick in cost associated with producing an extra unit of a product or service.

Allocative Efficiency

A state of the economy in which production represents consumer preferences; in other words, every good or service is produced up to the point where the last unit provides a benefit to consumers exactly equal to the cost of producing it.