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Marginal Productivity Theory of Income Distribution

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The least-cost rule
When a firm is producing a specific output with the least-cost combination of resources, where each resource yields the same marginal product.

Marginal product                       Marginal product
 of labor (MPL)              =           of capital (MPc)
 Price of Labor (PL )                  Price of Capital (Pc )

The profit-maximizing rule

A firm will achieve its profit-maximizing combination of resources when each resource is employed to the point at which its marginal revenue product equals its resource price.
 

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