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JAMB Economics 2006 Question 40

Question 40

Labour Market

The marginal productivity theory applies in a

  1. A.unionized labour market
  2. B.perfectly competitive market
  3. C.monopsonistic market only
  4. D.monopolistic market only
Show the answer and explanation

Answer: B (perfectly competitive market)

Explanation

The theory says workers are paid the value of their marginal product, which holds under perfect competition.