• Card 45 / 100: Explain how an employer calculates the marginal productivity of a worker.

    Answer:
    The employer estimates how much income or profit he would earn with the worker, compared to how much he would earn without the worker. (These estimates don't count the additional expense of hiring the worker.) The difference is the marginal productivity of the worker, and represents the most that the employer would pay to hire her. Sample Partial Credit Answer The employer pays the worker how much she is worth to the company.

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Capitalism: The Market Economy

Access: Public Peer Review

Attribution:  Dr. Robert P. Murphy, Lessons for the Young Economist. (Mises Institute), http://mises.org/document/6215/Lessons-for-the-Young-Economist (Accessed 04 April, 2014). License: Creative Commons BY
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