Chapter 73, Problem 2MCQ

To determine

The source of wage differences which is inconsistent with the marginal productivity theory of income distribution.

Answer to Problem 2MCQ

From the available options, the correct option is efficiency wages.

Explanation of Solution

When there are income disparities are associated with gender, race, or ethnicity then, the marginal productivity theory of income distribution would be inconsistent. This is because when employers pay higher wages than the minimum wage to retain certain categories of workers such as males to increase productivity, then there is income disparity based on gender. Human capital covers the difference in skills, experience, or knowledge of workers. Compensating differentials involves higher wages to employees according to the risky nature of work. Education involves wages paid according to the qualification of workers, and talent covers what technical or aptitude skills employees have.

Therefore, the correct option is d (efficiency wages).

Economics Concept Introduction

Introduction: According to the marginal productivity theory of income distribution, every individual will receive wage or income according to the total contribution or output that they produce.