Question

Are workers paid their marginal product? If not, why? Try to provide examples where workers may receive wages above or below their marginal product

Answer 1

The workers are not paid the wage equivalent to the marginal product of labour. It is estimated that wage rate is 15 to 20 percentage less than marginal product.

The rigidities in the labour market causes such gap between the wage and marginal product.

When the monopsony firm reduces the wage, the market forces do not clear instantaneously. Thus, labour supply does not fall. Further more, there are lack of labour union and other law who can ensure the wage which is equal to the marginal product of labour.