According to the neoclassical theory of distribution, the wages paid to workers
A)reflect the market prices of the goods those workers produce.
B)reflect the degree of market power held by the firms that pay those wages.
C)fail to reflect those workers' opportunity costs of leisure.
D)are unrelated to the forces of supply and demand.

Question

Quizplus · Accepted Answer

According to the neoclassical theory of distribution, the wages paid to workers reflect the market prices of the goods those workers produce. This is because in a competitive market, the demand for labor (and therefore the wage rate) is determined by the marginal product of labor, which is the additional output produced when one more unit of labor is added. The value of this additional output is determined by the market price of the goods the workers produce, and hence the wage rate reflects this market price.

According to the Neoclassical Theory of Distribution, the Wages Paid