What should have happened to their real wage

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Q. To neoclassical theory of distribution, real wage earned by any worker equals that worker's marginal productivity. Let's use this insight to examine incomes of two groups of workers: farmers and barbers. A. Over past century, productivity of farmers has risen substantially because of technological progress. According to neoclassical theory, what should have happened to their wage? If farmers have a Cobb-Douglas production function and A increases, n MPL also increases. Given a constant supply of farmers, their real wage increases to match higher MPL. B. In what units is real wage in part (a) measured? wage should be measured in terms of what farmers' produce will purchases from or producers. C. Over same period, productivity of barbers has remained constant. What should have happened to their real wage? Given a constant MPL, barbers should have experienced no wage change. D. In what units is real wage in part (c)

Reference no: EM1369515

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