According to the Neoclassical Theory of Distribution, If Firms Are

question 94

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

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Definitions:

Absorption Costing

An approach in financial accounting that wraps all expenses incurred in manufacturing including direct materials, direct labor, and all overhead (variable and fixed), into the product's cost.

Net Operating Income

The total revenue of a business minus its operating expenses, excluding taxes and interest.

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, labor, and both variable and fixed overhead - in the cost of a product.

Net Operating Income

An entity’s income after all operating expenses have been deducted from total revenue, excluding taxes and interest charges.