Example. Suppose wa have a plot of land. The production function relating labor to output is given by q = 12N-2Nper day. Suppose the eage rate is 8$per worker per day. Equating average product per person, q/n, to the wage yields the open access solution. We find that 8 = 12-2N or N=2.With 2 workers, total output will be 16,and output per worker equal to 8
It the marginal product of labor, dq/dN ,is equated to the wage rate, the private property solution is obtained. We find that 8 = 12 -4N and N=1. Total output is now 10 bushels, resulting in output per worker in the economy of 10 bushels as well. This illustrates the efficiency of the private property allocation of worker, which equalizes marginal products. The equity or fairness of distributing the total product among the worker is a separate issue.