At Hamill Manufacturing of Pennsylvania,highly skilled senior machinists are paid $70,000,excluding benefits,but the average skilled machinist generates approximately $137,000 in value added.This difference is due to the fact that the:

A) marginal productivity theory of income distribution does not apply in this case.
B) equilibrium wage rate includes other costs,such as employee benefits,that have to be subtracted from the $70,000 salary.
C) equilibrium wage rate includes other costs,such as employee benefits,that have to be added to the $70,000 salary.
D) value of the marginal product of the last machinist hired is equal to the average of all machinists employed.

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Oretha Mckinnis · Accepted Answer

Final Answer : C, Explanation :  The equilibrium wage rate for the highly skilled machinist includes other costs such as employee benefits, which would increase the total compensation to more than $70,000. Therefore, the difference between the pay of the highly skilled machinist and the average value added by all machinists can be explained by the inclusion of employee benefits in the equilibrium wage rate. This is consistent with the economic theory of marginal productivity, which states that an individual's wage should be equal to the value of their marginal product.

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