The marginal productivity theory of income distribution states that
A) income distribution is determined by the marginal productivity of the factors of production that individuals own.
B) as more and more units of labor are added to a fixed quantity of capital, eventually labor's contribution to a firm's income will decrease.
C) factors of production in short supply command higher prices than those available in abundant quantities.
D) capital owners receive the bulk of a nation's income because capital-intensive production generates productivity gains.
A
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The text uses traffic congestion as an example of
A) a surplus of automobiles. B) a negative externality. C) a good priced above equilibrium. D) an engineering rather than an economic problem.
Assume the market demand for wheat may be written as
Q = 45 - 2p + 0.3Y + 1pb where Y refers to income and pb refers to the price of barley. Assuming that wheat and barley both sell for $1, and income is $20, calculate the price elasticity, cross price elasticity and income elasticity for wheat.
If the demand curve for agricultural products is elastic and farmers as a group become more productive, then prices of agricultural goods will __________ and total revenue earned by farmers will __________
A) decrease; increase B) decrease; decrease C) increase; increase D) increase; decrease E) We cannot answer this question without knowing how elastic the demand curve is.
The controversy over affirmative action illustrates the
A. trade-off between equality and efficiency. B. incentive problems created by transfer payments. C. incentive problems created by personal income taxes. D. trade-off between progressive and regressive taxes.