Paper 3 · June 2006 · labour markets and wage differentials
Which theory of wage differentials explains that a worker's wage reflects the value of their marginal contribution to a firm's output?
AHuman capital theory
BMarginal productivity theory
CMonopsony theory
DCompensating wage differentials theory
Explanation
Marginal productivity theory holds that in a competitive labour market a worker is paid a wage equal to the value of their marginal product, so differences in productivity across workers and occupations translate directly into wage differentials.
Derived from ZIMSEC Economics Paper 3, June 2006, Q5