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GCE Economics 1989 Question 34

Question 34

Labour Market

Wages are to some extent determined by the

  1. A.marginal utility of labour
  2. B.marginal productivity of labour
  3. C.average productivity of labour
  4. D.total productivity of labour
  5. E.amount of goods and services that the wage can fetch.
Show the answer and explanation

Answer: B (marginal productivity of labour)

Explanation

By the marginal productivity theory, an employer pays a worker up to the value of what the last worker adds to output.