Marginal Productivity Theory Implies That in a Perfectly Competitive Market

question 171

Multiple Choice

Marginal productivity theory implies that in a perfectly competitive market economy, a worker will receive income

• A) equal to the value of her marginal contribution to the production process.
• B) that is greater than the value of her marginal contribution to production process.
• C) that is less than the value of her marginal contribution to the production process.
• D) greater than, less than, or equal to the value of her marginal contribution to the production process, depending on her ability to negotiate with employers.

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Definitions:

Investment Turnover

A ratio that measures the efficiency of a company’s use of its assets in generating sales or revenue; the ratio of net sales to average total assets.

Transfer Prices

Prices charged for the selling of goods and services between subsidiaries or divisions within the same company.

Variable Cost

Expenses that change in proportion to the level of production or business activity.

Negotiation

A strategic discussion that resolves an issue in a way that both parties find acceptable, often used in business to finalize deals, terms, and prices.