The marginal productivity theory of factor pricing jkssb FAA
The marginal productivity theory of factor pricing is an economic theory that explains how the price of a factor of production (such as labor or capital) is determined by its marginal productivity, or the increase in output that results from an additional unit of the factor. The theory states that the price of a factor of production will be equal to its marginal productivity, or the additional revenue that is generated by using an additional unit of the factor. An important aspect of the marginal productivity theory is that it assumes that the other factors of production are held constant. This means that if an additional unit of labor is added to a production process, for example, the theory assumes that the amount of capital, land, and other inputs remains the same. This allows us to isolate the effect of the additional unit of labor on output and revenue. The following are a few important MCQs on the subject: Which of the following is a key assumption of the marginal productivity