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The president of the United States receives an annual salary of $400,000, while some top baseball players such as Clayton Kershaw and Mike Trout earn more than $34 million annually. Based on marginal productivity theory, what does this say about their contributions to society

Sagot :

Anthougoidn

Answer:

Based on marginal productivity theory, this says that their contributions to society are not equal because society is willing to pay more for Clayton Kershaw and Mike Trout as baseball players than it is willing to pay for the president of the United States.

Explanation:

a) Data and Calculations:

Annual salary of the U.S. president = $400,000

Annual salary of baseball players = $34 million

For each dollar paid to the U.S. president, society is willing to pay a baseball player $85 ($34 million/$400,000)

b) The marginal productivity theory, which considers the contribution made by each factor of production, is based on the following assumptions that:

1) all units of the production factor, for example, labor, are homogeneous.  

2) the baseball player can be substituted for the U.S. president.  

3) there is perfect mobility of factors, from being a baseball player to being a U.S. president, and vice versa.

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