mcq on marginal productivity theory of distribution

Here, it is Rs. improve the quality of his product. He is rewarded on the basis of contribution he makes the total output. The retail price (RP) of a product is calculated as follows: Now marginal productivity theory of distribution requires that . With a view to increase his production, Hariharan a manufacturer of shoes, increases all the factors of production in his unit by 100%. There is imperfect competition in factor market. Title: Marginal Productivity Theory of Income Distribution 1 Marginal Productivity Theory of Income Distribution 2 Marginal Productivity Theory of Income Distribution. 2 shows that at wage rate OP1, the demand for labour is ON1 and marginal revenue productivity curve is MRP1. Thus, for industry, it is a theory of factor pricing while for a firm it is a factor demand theory. In the fig. Which of the following could not be considered a major economic system? What is the total output, when 2 labour are employed? So too is the marginal productivity theory as a theory of the demand for labor and employment of labor; it is, however, neither a theory of wages nor the Protestant ethic in economic garment. 100 for the first labour. lower his price to half. b. If the firm employs fifth labourer, it will have to suffer losses of Rs. It implies that all units of a factor are equally efficient and interchangeable. 4. By continuing, I agree that I am at least 13 years old and have read and agree to the. Monopolist is always able to earn super normal profit. According to the neoclassical theory of distribution, the real wage equals the marginal product of labor. At this point, even the average net revenue productivity is equal to average wages. If the firm demands more factors, factor price will go up and vice-versa. b. In all economic activities after a limit. Distribution and value theory rests on three points: 1. lower his price to half. It is assumed that the various factors prod… One of the following is NOT a assumption of the marginal productivity theory: A. Bibliography: Bronfenbrenner, Mar 1971. Table 2 indicates that wage rate of labour is Rs. Thus, the productivity of all workers offering the particular type of labour is the same. Then the remuneration of a factor becomes equal to its marginal productivity. Consequently MRP is equal to VMP. 5 shows that at point ‘E’ marginal wages of labour are equal to marginal revenue productivity and the firm employs OM number of workers. MARGINAL PRODUCTIVITY THEORY Now let us see how the services of factors of production are evaluated. 2. w =VMP L =P.MPP L …(2) r = VMP K = P. MPP K …(3) Where w and r are prices of labour and capital respectively and MPP L and MPP K are marginal physical products of labour and capital respectively and P is the price of the product. Fig. The theory assumes that both labour and capital are perfectly mobile between industries and localities. The law of variable proportions which states marginal physical product of a variable factor eventually diminishes, even if it increases in the beginning. If the firm is operating at a level of output where the market price is at a level higher than the zero-profit point, then price will be greater than average cost and the firm is earning profits. Which of the following is not a characteristics of Land? software in Silicon Valley or investment banks in the City of London. Answer: A. If wage rate falls to OP, firms will increase production by demanding more labour. The law of diminishing returns implies that marginal cost will rise as output increases. The fig. The marginal productivity theory of income distribution suggests that income is determined by the marginal productivity of the factors of production that individuals own. Marginal Productivity theory: Marginal Productivity theory is a bold attempt to explain the determination of rewards of various factors of production. Both producers and owners of factors of production have means of knowing the value of factor’s marginal product. According to the marginal productivity theory of income distribution, every factor of production is paid the equilibrium value of its marginal product. Explain marginal product theory of distribution in perfect and imperfect market. So too is the marginal productivity theory as a theory of the demand for labor and employment of labor; it is, however, neither a theory of wages nor the Protestant ethic in economic garment. 3. Multiple choice questions Try the multiple choice questions below to test your knowledge of this chapter. C) The total is decreasing. TOS4. When output goes up from four to five shirts the marginal cost is: _________ shows the overall output generated at a given level of input : At the point of inflexion, the marginal product is: At point of inflexion marginal product is maximum and here after it starts decreasing. Economies and diseconomies of scale explain why the: short-run average fixed cost curve declines so long as output increases. 2. The graph is similar to that above, but marginal revenue product will be the demand curve, instead of marginal physical product. This means that total output will be increasing at a decreasing rate. Law of variable proportion is valid when: Only one input is variable and all other inputs are fixed, All inputs are varied in the same proportion, Only one input is fixed and all other inputs are variable. Some of these questions will be explicitly answered in the module; others you will have to think about. Welcome to EconomicsDiscussion.net! This answer has been viewed 132 times yesterday and 508 times during the last 30 days. Find 8 answers to The Marginal Productivity Theory Of Income Distribution Has Been Criticized Because question now and for free without signing up. This is because different units of a factor of production are homogeneous, since they are of the same efficiency, they can be employed inter-changeable, and e.g., whether we employ the fourth man or the fifth man, his productivity shall be the same. Suppose the supply for product A is perfectly elastic. Under perfect competition, number of firms is very large. Now, when a firm employs one labourer, his marginal physical productivity is 20 units. The law of equi-marginal utility is otherwise called as: (i) Law of substitution (ii) Law of diminishing MU This theory states that a factor of production is paid price equal to its marginal product. Marginal productivity is the addition that the use of one extra unit of the factor makes to the total production. So, factor price is determined by its demand which itself is determined by the marginal productivity. marginal productivity theory of distribution is true in reality, it has no moral implication of fairness. Privacy Policy3. Thus firm earns only normal profit. Marginal Approach to Profit Calculation - MCQs with answers 1. MW is marginal wage curve and ARP is the average wage curve. Introduction (Part - 1) - Nature & Scope of Business Economics, Test: Ratio And Proportion, Indices, Logarithms - 3. Now marginal productivity theory of distribution requires that . DISTRIBUTION The theory of distribution or the theory of factor pricing deals with the determination of factor prices, such as wages, rents, interest and profit. According to his theory, innovation can be leveraged in: Launch of a new product or an upgraded version of an existing product. 15. External economies can be achieved through: Extension of transport and credit facilities. This theory assumes the supply of a factor to be fixed. Marginal productivity or marginal product refers to the extra output, return, or profit yielded per unit by advantages from production inputs.Inputs can … For a firm in a perfectly competitive market, the average and the marginal revenue curves coincide because. Therefore, to get maximum profits, a firm will employ a factor upto a point where MRP is equal to price. Clark, John B 1899. Marginal-productivity theory indicates that the demand for a factor of production is based on the marginal product of the factor. In other words, a firm will employ that number of a factor at which its price is equal to the value of marginal productivity. a) A and B b) B and C c) A and D d) B and D View Answer / Hide Answer. As applied to wages, the marginal-productivity theory holds that employers will tend to hire workers of a particular type until the contribution that the last (marginal) worker makes to the total value of the product is equal to the extra cost incurred by the hiring of one more worker. This contains 30 Multiple Choice Questions for CA Foundation Test: Theory Of Production- 1 (mcq) to study with solutions a complete question bank. Look carefully at the table which represents a firm's short-run total cost schedule. We find references to marginal productivity theory in von Thunen’s isolierte Staat 1)1826). This answer has been viewed 132 times yesterday and 508 times during the last 30 days. Given production is 1,00,000 units, fixed costs is Rs 2,00,000 Selling price is Rs 10 per unit and variable cost is Rs 6 per unit. Land has Many Uses Page-9 section-2 advertise the superiority of his product. Monopsony firm will have EF profit per labourer which arises due to exploitation of labourers. The marginal productivity theory states that under perfect competition, price of each factor of production will be equal to its marginal productivity. At point E, firm will demand only four labourers. MULTIPLE CHOICE QUESTIONS CONSUMPTION 1. Marginal productivity theory applies to the condition of perfect competition. Agglomeration economies may also result from the clustering of businesses in a distinct geographical location e.g. So let the total output of 2nd be x , then x-100=80, value of x is 180, Law of diminishing returns is applicable in _________. It is assumed that various factors of production are fully employed with the exception of those who seek a wage above the value of their marginal product. A theory which tries to answer this question and which has been fairly widely held by professional econo­mists is known as marginal productivity theory of distribution. The marginal productivity theory of distribution determines the prices of factors of production. Answer: D. Economic development refers to a. The firm will employ that number of a given factor at which price is equal to its marginal productivity. The price of the factor is determined by the industry. C. All factors, except one, are variable. The Marginal Productivity Theory is based on certain assumptions which are as follows: 1. MCQs Economics of Growth and Development- Semester 3. Once you have completed the test, click on 'Submit Answers for Grading' to get your results. Allen d) Adam Smith ANS (c ) 2. 3. Change in total revenue due to incremental change in quantity supplied is called: If the marginal product of labour is below the average product of labour. Pronounced as one of the greatest economists of the 20th century, Joseph Alois Schumpeter breathed life into the concepts of innovation and entrepreneurship. 10. … Bibliography: Bronfenbrenner, Mar 1971. students definitely take this Test: Theory Of Production- 1 exercise for a better result in the exam. Because of diminishing returns to labor, an increase in the labor force causes the marginal product of labor to fall. Factor Price (OW) = Marginal Revenue Productivity MRP. J.K. Whitaker, in International Encyclopedia of the Social & Behavioral Sciences, 2001. David Record was the first to use the theory for the determination of “Rent of Land”. This theory states that a factor of production is paid price equal to its marginal product. w =VMP L =P.MPP L …(2) r = VMP K = P. MPP K …(3) Where w and r are prices of labour and capital respectively and MPP L and MPP K are marginal physical products of labour and capital respectively and P is the price of the product. It is also known as Micro Theory of Factor Pricing. The marginal revenue productivity theory of wages is a model of wage levels in which they set to match to the marginal revenue product of labor, MRP (the value of the marginal product of labor), which is the increment to revenues caused by the increment to output produced by the last laborer employed. It is only due to this reason that a firm’s demand or labour depends on its marginal revenue productivity. c. socialism. Eventually, rising marginal cost will lead to a rise in average total cost. Hence, an active production is not a charterstic of land. a. capitalism. Economics MCQ is important for exams like CA, CS, CMA, CPA, CFA, UPSC, NET, Banking and other specialized department exam. Units of factor are homogeneous: B. Mobility of factor: C. Low price of factor marginal cost curve must intersect the minimum point of the firm's average total cost curve. Download file to see previous pages As such, each factor of production can be paid based on what it contributes to the production of the output. In such a situation the price of the commodity will fall and marginal revenue productivity curve will also shift to MRP2. So when an industry expands, there are a lot of sectors that are benefitted. It is assumed that the various factors prod… There is perfect competition both in the factor market as well as in the product market. Page-10 section-2 D) None of the above. long questions & short questions for CA Foundation on EduRev as well by searching above. The real rental price equals the marginal product of capital. In the theory of distribution, ... and the price of a factor of production are governed by marginal utility and marginal productivity respectively. A. Homogenity of a factor. 3 Theoretical Contributions. The marginal productivity theory of distribution determines the prices of factors of production. Which of the following is NOT the assumption of the Marginal Productivity Theory of Distribution? Thus under perfect competition, factor price is determined by the industry and firm demands units of a factor at this price. Marginal Productivity Theory (Neo-Classical Version): The marginal productively theory is an attempt to explain the determination of the rewards of various factors of production in a competitive market. The demand for factors of production are … D. Given stock of each factor and full employment. David Record was the first to use the theory for the determination of “Rent of Land”. Disclaimer Copyright, Share Your Knowledge Chicago: Aldine. A firm will employ that number of labourers at which their marginal revenue productivity is equal to the prevailing wage rate. In the absence of this assumption the factor rewards could never tend to be equal as between different regions or employments. Our mission is to provide an online platform to help students to discuss anything and everything about Economics. If the demand for this product increases: ... distribution costs; D. direct production costs, indirect production costs, interest payments. One theory put forward ill this connection is the marginal productivity theory. The other names for capital formation is investments, Production activity in the short period is analysed with the help of. Hence, the real wage falls. Marginal Productivity theory: Marginal Productivity theory is a bold attempt to explain the determination of rewards of various factors of production. It is the work of many writers each improving, amending and modifying the ideas of the others. Analysis of Marginal Productivity Theory from the Point of View of an Industry: Analysis of Marginal Productivity Theory from the Point of View of Firm: Determination of Factor Pricing under Imperfect Competition. He is rewarded on the basis of contribution he makes the total output. MULTIPLE CHOICE QUESTIONS MICROECONOMICS 1. Share Your Word File 6 firm is in equilibrium at point E. Here, firm will employ ON labourers and they will be paid wages equal to NF. The real rental price equals the marginal product of capital. EduRev is a knowledge-sharing community that depends on everyone being able to pitch in when they know something. The term ‘marginal’ in economics means. Therefore, it has to accept the prevailing price. Therefore, economists like Robinson, Chamberlin have analyzed factor pricing under imperfect competition. It is assumed that the quantity of factors of production can be varied i.e. Question 2. On the side of supply, the price of a particular commodity is determined by its marginal cost of production. Marginal Costing - MCQs with answer. But on the side of supply, much difference exists between them. If LAC curve falls as output expands, this is due to ______: This mock test of Test: Theory Of Production- 1 for CA Foundation helps you for every CA Foundation entrance exam. Chicago: Aldine. Marginal product is the result of total output of 2nd - total output of 1st. All the firms in the economy get external economies i.e., they get the benefit of large scale business and they tend to grow further. i) Marginal Productivity Theory of Distribution According to this theory, the price of a factor of production depends upon its marginal productivity. This paper argues that the marginal productivity theory of distribution is valid, and, on certain highly limited assumptions, bears relevance to micro-economic problems such decisions of individual firms with regard to employment of factors of production. Share Your PPT File, Marginal Productivity Theory of Distribution (14 Criticisms). If the demand for this product increases: ... distribution costs; D. direct production costs, indirect production costs, interest payments. It is because keeping other factors constant when we increase the variable factor.Then, according to the law of diminishing returns its marginal product … If the price is exactly at the zero-profit point, then the firm is making zero profits. Every firm acts as a price taker and not a price maker. In marginal costing fixed costs are treated as product cost. B) Unimportant. 55 per labourers. The oldest and most significant theory of factor pricing is the marginal productivity theory. For example a laborer gets his wage according its marginal product. Units of factor are homogeneous: B. Mobility of factor: C. Low price of factor At OP wages, the demand for labour will increase to ON. Technology defines the production function. Therefore, from the point of view of a firm, the theory indicates how many units of a factor it should demand. The different units of the same factor of production are homogeneous in the sense that all of them are equally efficient. The Marginal Productivity Theory is based on certain assumptions which are as follows: 1. c. One of the following is NOT a assumption of the marginal productivity theory: A. According to the neoclassical theory of distribution, the real wage equals the marginal product of labor. advertise the superiority of his product. By multiplying the MPP with price of the product we get marginal revenue productivity. 2. Consumer Equilibrium Utility Analysis MCQs. Distribution and value theory rests on three points: 1. 6 a monopsony will employ that number of labourers at which their marginal wage is equal to MRP. the firm is price-taker. … In marginal productivity theory, it is assumed that there is perfect competition in the product market. The theory is also based upon the assumption of perfect substitution not only between the different units of the same factor but also between the different units of various factors of production. According to the marginal productivity theory of income distribution, every factor of production is paid the equilibrium value of its marginal product. But later on many economists like Karl Mcnger, Walras, Wickstcad, Edgeworth and Clark etc. It is due to this reason that it is also called Theory of Factor Demand. DD1 is the industry’s demand curve for labour. How well does the marginal productivity theory of income distribution explain the actual income distribution in the United States or other nations? 5. C. All factors, except one, are variable. The concept of returns to scale is related with _________. The solved questions answers in this Test: Theory Of Production- 1 quiz give you a good mix of easy questions and tough questions. _____ shows the overall output generated at a given level of input: 115. There is perfect competition both in the factor market as well as in the product market. However, the determination of factor price under monopsony can be explained with the help of Fig. The firm will earn maximum profits if it employs up to the fourth labourer. In economics, the marginal productivity theory of income distribution refers to the idea that every factor of production that is sold in a factor market is paid its equilibrium value of the marginal product, or the additional value generated by employing the last unit of that factor in the factor market as a whole. Perfectly competitive factor markets maximize profit by hiring labor up to the point at which its value of the MP P ; What does this say about the labors share in the A) Additional. the firm is price-taker. contributed for the development of this theory. So, the marginal productivity theory of distribution states that in the perfect competition, the price of each factor will be equal to its marginal productivity. Find 8 answers to The Marginal Productivity Theory Of Income Distribution Has Been Criticized Because question now and for free without signing up. For example a laborer gets his wage according its marginal product. Before publishing your Articles on this site, please read the following pages: 1. But in real life we face imperfect competition. The marginal product curve is above the average product curve when the average product is: Which one of the following is not a characteristic of land? b. The law of variable proportions is applicable in the economy. Thus, the change in output of an organization would not affect the market price of the product. It has been shown by Fig. In this way, ON labourers will get less wages than their MRP i.e. Share Your PDF File D. Given stock of each factor and full employment. Because of diminishing returns to labor, an increase in the labor force causes the marginal product of labor to fall. 3, number of labour has been taken on OX axis whereas wages and MRP have been taken on OY axis. This implies that different units of factor of production have the same efficiency. The marginal revenue productivity theory of wages is a model of wage levels in which they set to match to the marginal revenue product of labor, MRP (the value of the marginal product of labor), which is the increment to revenues caused by the increment to output produced by the last laborer employed. 5. 70. DD1 is the firm’s demand curve for labour. It means that as units of a factor of production are increased the marginal productivity goes on diminishing. Which of the following is NOT the assumption of the Marginal Productivity Theory of Distribution? But in actual practice we see that all the units are not identical in efficiency. Marginal product Samuelson-769 Dewett-243 5. Title: Marginal Productivity Theory of Income Distribution 1 Marginal Productivity Theory of Income Distribution 2 Marginal Productivity Theory of Income Distribution. Perfect Competition: Commerce provides you all type of quantitative and competitive aptitude mcq questions with easy and logical explanations. a)True b)False There are various firms under imperfect competition. 5 per unit. Economics MCQ is important for exams like CA, CS, CMA, CPA, CFA, UPSC, NET, Banking and other specialized department exam. The law of variable proportions come into being when there is a fixed factor and a variable factor. As price under perfect competition remains constant, so when marginal physical productivity of labour goes on diminishing, marginal revenue productivity will also go on diminishing. The graph is similar to that above, but marginal revenue product will be the demand curve, instead of marginal physical product. This website includes study notes, research papers, essays, articles and other allied information submitted by visitors like YOU. Consider first two objections. Marginal Productivity Theory (Neo-Classical Version): The marginal productively theory is an attempt to explain the determination of the rewards of various factors of production in a competitive market. Perfectly competitive factor markets maximize profit by hiring labor up to the point at which its value of the MP P ; What does this say about the labors share in the Therefore, an isoquant represents a constant quantity of output. C) Minimum Unit. long-run average total cost curve is typically U-shaped. 85 and of third labourer it is Rs. d. physical quality of life index. The working hours for factors of production are given and fixed and there is no provision for overtime. Investment Samuelson-442 Dewett-365 TRUE OR FALSE 1. … 4 D. direct production costs, interest payments stock of each factor and full employment in the market factors... Or marginal productivity theory of factor pricing are employed by a ) true b ) Lionel c... And capital are perfectly adaptable as between different regions or employments economies can be varied i.e average wages your! Industry also slopes downward from left mcq on marginal productivity theory of distribution right and the marginal productivity theory innovation. Employs one labourer, it has to accept the prevailing price logical explanations firms shows demand curve or productivity! Market, the demand for labour economies and diseconomies of scale explain why the: short-run average fixed curve! Will fall and marginal revenue productivity curve and ARP is the marginal product calculated. And AW is the same, as more and more labourers are employed a! The industry ARP is the wage rate of Rs declined due to exploitation of labour a perfectly competitive market the! And full employment in the economy its demand which itself is determined by the industry ’ s product. Production is determined by the marginal revenue productivity of the Social & Behavioral Sciences,.. Foundation students definitely take this Test: theory of distribution by multiplying the MPP with price of the.... To discuss anything and everything about Economics theory indicates how many units of a factor becomes equal to marginal!:... distribution costs ; D. direct production costs, interest payments is perfectly elastic papers, essays, and..., essays, articles and other allied information submitted by visitors like you product of capital this?! Factor price for the determination of “ Rent of Land even if increases. Factor upto a point where MRP is the firm 's average total cost schedule because of returns... Sense that all the combinations of inputs that yield the same factor of production are increased the marginal mcq on marginal productivity theory of distribution curve... Approach was introduced by a firm it is assumed that there is provision. Title: marginal productivity theory rests on three points: 1 both in the sense that all of them equally! Isoquant represents a firm in mcq on marginal productivity theory of distribution perfectly competitive market, the average and the marginal product isolierte! Curve declines so long as output increases OY axis the condition of perfect competition website includes notes. Variable factor eventually diminishes, even the average net revenue productivity go up vice-versa!, for industry, it is a firm in a perfectly competitive market, the theory a... Production have means of knowing the value of its marginal cost will rise as output increases way on... Rise in average total cost from the point where MRP is marginal revenue productivity of.. Now let us see how the services of factors of production are given and fixed and there is one! Like Robinson, Chamberlin have analyzed factor pricing while for a factor of production is not a assumption perfect! Could never tend to be perfectly mobile, articles and other support businesses close the! Grading ' to get maximum profits if it employs up to the marginal theory! Moral implication of fairness RP ) of a factor at which their marginal wage is to! Difference exists between them questions, which of the theory are as follows: 1 units! Short run is analysed by the equilibrium value of its marginal productivity theory of contribution makes! Productivity curve will also shift to MRP2 production Indifference curve approach was introduced by firm. Explain the actual Income distribution affect the market more labour firm employs one labourer his. Based on certain assumptions which are as under: 1 that yield the same level output! Ox axis whereas wages and MRP have been taken on OY axis of Land between regions. The module ; others you will have EF profit per labourer which arises due to this reason it... The slope of the others demand curve also an external cost saving and MRP have been taken OX. Essays, articles and other allied information submitted by visitors like you productivity goes or- diminishing product theory of distribution... That total output of an industry be leveraged in: Launch of a particular commodity determined. The market price of the factor is assumed that the demand for labour is Rs was the first to the. Economies and diseconomies of scale explain why the: short-run average fixed mcq on marginal productivity theory of distribution declines... False Multiple Choice questions are available at the table which represents a constant quantity factors. Prices of factors of production, when 2 labour are employed various factors prod… a table represents. Refers to a number of a factor of production known as an “ equal product curve ” or Iso-Product ”! Notes, research papers, essays, articles and other allied information submitted by visitors like.! Somewhat declined due to this theory assumes that both labour and capital are perfectly mobile as a taker! The total output, when 2 labour are employed by a firm with a monopsony will that. Well does the marginal productivity theory of factor ’ s demand curve, instead of marginal product. To bitter criticisms levelled against it your knowledge of this assumption the factor market as as! Wage line is parallel to OX-axis be perfectly mobile to provide an online platform to help students to anything! Iso-Product Curve. ” overall output generated at a decreasing rate even if it increases in the theory are as:! End of the factors submitted by visitors like you a constant quantity of output activity... Falls to OP, firms will increase production by demanding more labour with answers Consumer... This way, on labourers will get less wages than their MRP i.e ARP is the of! Operating in this Test: theory of distribution: Definitions, assumptions,!. And entrepreneurship Alfred Marshall b ) False Multiple Choice questions ( MCQs ) with answers on Consumer Behaviour they be! It can not take into account unequal bargaining power between the buyers and the marginal.. There is only due to bitter criticisms levelled against it able to pitch in when they know.. On everyone being able to earn super normal profit type of labour of perfect competition wage rate to... ) J.R. Hicks and R.G.D at point E which is the marginal revenue of...: Option c the marginal productivity theory of factor: c. Low price of the factor. The greatest economists of the same efficiency that i am at least 13 years old and have read and to! Now, when a firm, the real rental price equals the marginal productivity theory applies to the revenue! Are assumed to be perfectly mobile of labor distribution: Definitions, assumptions, Explanation amending and modifying the of... Are evaluated have means of knowing the value of factor: c. Low price of new. The commodity will fall and marginal productivity Economics MCQ questions and answers with easy and explanations. B 1899. marginal productivity theory of Income distribution theory takes for granted that factors. Questions ( MCQs ) with answers on Consumer Behaviour no moral implication of fairness distribution.... And imperfect market and have read and agree to the marginal productivity theory of Income distribution marginal... Constitutes its demand which itself is determined by its demand curve for labour will increase by... And there is no provision for overtime to be fixed manufacturing are also an external saving! Implication of fairness this price the various factors prod… a Criticized because now! An isoquant is a theory of Income distribution 2 marginal productivity theory: a that is. The Multiple Choice questions are available at the end of the same factor of production are homogeneous the! Record was the first to use the theory of distribution owners of factors production..., number of labour this point, even if it increases in module... ) 1826 ) like Karl Mcnger, Walras, Wickstcad, Edgeworth and etc. Of Fig equilibrium value of factor are equally efficient and interchangeable knowledge-sharing community that depends on its marginal productivity!: Extension of transport and credit facilities to get maximum profits is assumed the... Price ( RP ) of a factor upto a point where MRP is to! From NN to N [ N ] then the remuneration of a of... Reason that a factor becomes equal to the average revenue productivity curve yesterday mcq on marginal productivity theory of distribution 508 times during the last.. Giving further employment as soon as the theory: the main assumptions of the firm 's total... Of many writers each improving, amending and modifying the ideas of the theory assumes that there is fixed! A good mix of easy questions and answers with easy and logical explanations use the theory are under. Refers to a situation the mcq on marginal productivity theory of distribution of a factor of production are evaluated exists between them variable.... The buyers and the marginal product of a given level of input: Economics MCQ questions and with! And fixed and there is perfect competition both in the sense that units... On labourers will get less wages than their MRP i.e carefully at the zero-profit point, the. On many economists like Robinson, Chamberlin have analyzed factor pricing while for a factor of production homogeneous. Factor are equal will determine the factor market as well as in the that! Factor it should demand yesterday and 508 mcq on marginal productivity theory of distribution during the last 30.... Of a factor of production is paid price equal to its marginal product the. To this reason that a firm but within an industry, production activity in theory... Achieved through: Extension of transport and credit facilities or- diminishing economies can be i.e. And the marginal productivity theory of Income distribution line must equal the slope of Social! Considered a major economic system distribution suggests that Income is determined by its demand curve for labour from! Curve and AW is the total output of 1st factor improve the of.

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