Chapter 13R, Problem 22MCQ

To determine

The correct option that defines reason for wage inequality as per the marginal productivity theory.

Answer to Problem 22MCQ

Option a is correct.

Explanation of Solution

Explanation for correct option:

a.

As per marginal productivity theory of income distribution, there are various reasons for wages inequality such as compensating differentials. As per compensating differentials, the wages are paid according to the type of job because there are some jobs which are more dangerous. Education, skills, talent and training are the other reasons for wage inequality. Therefore, option a is correct.

Explanation for incorrect options:

b.

Union activity is one of the activities that is collectively decided by the workers. Wages are not being paid according to voluntary actions of workers, Therefore, option b is incorrect.

c.

Discrimination is not the direct reason for wage inequality as per marginal theory. Therefore, option c is incorrect.

d.

Wage inequality does exist because of wage efficiency to some extent but the main reason for wage inequality as per marginal productivity theory is compensating differentials. Therefore, option d is incorrect.

e.

For similar human capital same wages should be paid as per marginal productivity theory of income distribution. Therefore, option e is incorrect.

Economics Concept Introduction

Factor of production: Factor of production refers to the components or the resources that are required for producing intangible or tangible products.

Compensating differentials: As per marginal productivity theory, wages are paid to the workers as per the type of job due to which wages are different for different workers.