Economics
Economics
5th Edition
ISBN: 9781319066604
Author: Paul Krugman, Robin Wells
Publisher: Worth Publishers
Question
Book Icon
Chapter 19, Problem 1BCQ
To determine

Concept Introduction:

Marginal Productivity Theory of Income Distribution: The theory states that the factor will be paid an equilibrium amount at which the marginal product earned from employing an additional factor is equal to the price.

Poverty Line: This refers to a threshold to measure the number of people who are poor in the society who have insufficient resources to satisfy the basic needs of living, such as food, shelter and clothing.

Expert Solution & Answer
Check Mark

Explanation of Solution

  • In the given case, Walmart Company pays very low wages to its workers that the workers fall below the poverty line.
  • This is so because each worker is paid the equilibrium amount of the marginal product which might be very low for Walmart Company.
  • The additional units of factors used by the company might be less productive, which results in a lower marginal product which is paid to the workers.
  • Moreover, the workers who work less efficiently are paid low wages in return by the company.

Conclusion:

Thus, due to the above reasons, some of Walmart Company workers fall below the poverty line.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:9780190931919
Author:NEWNAN
Publisher:Oxford University Press
Text book image
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Text book image
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Text book image
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Text book image
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Text book image
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education