What are two criticisms of the marginal productivity theory of income distribution?
What will be an ideal response?
The marginal productivity theory of income distribution suggests that people should be paid according to their contribution to output. There are two basic problems with this idea. First, productive resources are not equally distributed. Human abilities and skills differ substantially. Also, there is an unequal distribution of property resources because of inheritances and other factors. As a result, some people with a limited human or property resource base will not receive a sufficient income from that resource base with which to live. Second, the theory is based on the assumption of competitive resource and product markets. Imperfect competition, however, exists in both product and resource markets. These imperfect markets give rise to monopolies that can distort the distribution of income.
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In the long-run equilibrium for a perfectly competitive market
A) the firms' economic profits are zero. B) there is no incentive for entry or exit. C) average total costs of production are minimized. D) All of the above are correct.
The market for buying and selling foreign currencies is often referred to as the market for:
A. foreign exchange. B. loanable funds. C. international trade. D. direct foreign investment.
The Fed could conduct an open market purchase to eliminate an inflationary gap.
a. true b. false
An economy that trades with the rest of the world is a(n) ________.
A. closed economy B. command economy C. open economy D. trade economy