When zero postloss financing is optimal (i.e., [DELTA]K = 0), according to first-order condition (6), the value of marginal product of second-period capital equals its marginal cost (i.e., pQ'([K.sub.1]) = [r.sup.2]/a[beta]r[bar.x]/r+1], at [alpha] = 1 when [K.sub.0] = [K.sub.1]).

Property insurance compensation not only results in additional value of marginal product of second-period capital, but also reduces the penalty of underproduction.

Wages rose faster than labor's value of marginal product (causing a falling shadow wage ratio), a result consistent with both the hypothesis that reform has led to the erosion of monopsony power and that of wage monetization (though the latter alone would not be sufficient to explain the decline in profitability).

The hypotheses, then, can be divided into four groups, each of which points toward a different pattern of relationships between factor prices and the value of marginal products, particularly in the labor market.

Noting that this term appears with the opposite sign in the bracketed term of Equation (9), and that in each equation the optimal quantity of labor is inversely related to the

value of marginal product, Equations (8) and (9) imply that the marginal utility workers derive from absence increases the optimal number of absences by decreasing [N.sub.W] and increasing [N.sub.E].

The marginal product obtained in physical units is then multiplied by the price of the output [P.sub.Y] which gives the value of marginal product of input i: VM[P.sub.i] = M[P.sub.i] x [P.sub.Y].

For comparison, Table 4 also shows the value of marginal product for the 'gross output' production function, which aggregates the values of both crop and livestock products.

Farmers apply water at a level so that the

value of marginal product of applied water is equal to water price.

First, has noted above, information costs would be reduced, because the market, composed of irrigators with expert knowledge of the value of water as an input in the production process, would bear the costs and generate the necessary information on the

value of marginal product and opportunity costs of water.

What If the

Value of Marginal Product Varies with the Real Rate?

(7)With respect to the first difference, the sharing models (e.g., Hashimoto [1979]) assume the

value of marginal product of a trained worker is independent of the level of employment.

In addition, the expected

value of marginal product for each employee is not known by either the firm or the employee and both sides are equally uninformed about this parameter, i.e., the labor market is symmetrically uninformed.