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marginal productivity theory |
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marginal productivity theoryIn economics, the theory that firms will pay a productive agent only what he or she adds to the financial earnings of the firm. Developed by writers such as John Bates Clark and Philip Henry Wicksteed at the end of the 19th century, marginal productivity theory holds that it is unprofitable to buy, for example, a man-hour of labour if it costs more than it contributes to its buyer's income. The amount in excess of costs that a productive input yields is the value of its marginal product; the theory posits that every type of input should be paid the value of its marginal product. Want to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit the webmaster's page for free fun content. |
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