Full text: Price Takers' Plenty in a Model of Pure Capitalism.

payments and the bonuses. 
A much more important and very definite advantage of the system 
is that despite the producers' loss of market power over wages, 
it gives them the same kind of excess demandfor labor that their 
dominant position in the labor market gave A them under the ordinary 
v/age system. 
To show that that is so, express the price or average cost of 
labor, AC^ , as 
AC^ = w + qAR 
and the marginal cost of labor, MC-^, as 
KC^ = w + a MVP , 
where MVP is the marginal value product of labor, w the annual 
sum of monthly wage payments, AR the firm’s average-revenue 
per worker, and q the workers' share of revenue distributed among 
them in the form of bonuses. 
Subtracting (2) from (1) shows that the the MC of labor is 
below its AC in the proportion in which the MVP of a worker 
short of his average gross product: 
AG 1 - MC 1 = q(AR - MVP) 

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