According to the Neoclassical Theory of Distribution, If Firms Are

question 106

Multiple Choice

According to the neoclassical theory of distribution, if firms are competitive and subject to constant returns to scale, total income in the economy is distributed:

• A)only to the labour used in production.
• B)partly between labour and capital used in production, with the surplus going to the owners of the firm as profits.
• C)equally between the labour and capital used in production.
• D)between the labour and capital used in production, according to their marginal productivities.

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Definitions:

Total Manufacturing Cost

The total expenses directly related to the manufacture of products, encompassing the price of raw materials, wages for direct labor, and indirect manufacturing costs.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to individual jobs or units based on a certain activity base, such as labor hours or machine hours, calculated before the period begins.

Machine-Hours

A measure of production or work volume calculated by the number of hours machines are operating.

Predetermined Overhead Rate

A rate used to apply manufacturing overhead to products or job orders, calculated by dividing estimated overhead costs by an allocation base.