According to the Neoclassical Theory of Distribution, in an Economy

question 169

Multiple Choice

According to the neoclassical theory of distribution, in an economy described by a Cobb-Douglas production function, when average labor productivity is growing rapidly:

• A) labor's share of total income will be increasing.
• B) labor's share of income will be decreasing.
• C) workers will experience high rates of real wage growth.
• D) economic profits will be positive.

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Definitions:

Demand Increased

A situation where the desire to purchase goods and services at a given price level rises, leading to higher quantity demanded.

Wage Rate

The standardized amount of pay that a worker receives for performing a certain job or task, typically expressed per hour or unit of work.

Retail Market

The part of the economy that deals with the sale of goods or services directly to consumers, encompassing a wide range of businesses and stores.

OPEC Nations

Member countries of the Organization of the Petroleum Exporting Countries, a group that coordinates the petroleum policies of its members to secure fair and stable prices for petroleum producers.