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The marginal productivity theory states that if a firm operates in a perfectly competitive factor market, it pays each factor of production its marginal revenue
The marginal productivity theory states that if a firm operates in a perfectly competitive factor market, it pays each factor of production its marginal revenue product. However, this theory may fail to hold if factor markets are not competitive. One circumstance under which factor markets may fail to be competitive is if there is imperfect information. Which of the following are ways in which government can help to solve information problems in factor markets? Check all that apply. Passing laws requiring firms to obtain information about every potential worker who applies for a job, regardless of their race, gender, etc. Certifying workers and other inputs as being of high qualityfor example, by testing gasoline pumps to ensure they distribute the amount of gas they say they do, or by administering standardized tests in high schools so that a high school diploma acts as a signal that a worker has mastered certain basic skills Passing a law prohibiting firms from firing workers unless they do something illegal
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