Asked by Falantina Rashoo on Apr 24, 2024
Verified
Under what circumstances will the economic rent earned by a factor of production always be zero?
A) Infinitely inelastic supply curve
B) Infinitely elastic supply curve
C) Somewhat inelastic supply curve
D) Elastic demand curve
Economic Rent
The extra amount earned by a resource above what would be needed to keep that resource in its current use, often due to scarcity or unique qualities.
Factor Of Production
Essential resources used in the production of goods and services, such as labor, capital, land, and entrepreneurship.
Supply Curve
The Supply Curve is a graphical representation showing the relationship between the price of a good and the quantity of the good that producers are willing and able to sell at each price level.
- Familiarize oneself with the concept of economic rent and the variables that dictate its behavior.
Verified Answer
ZK
Zybrea KnightMay 02, 2024
Final Answer :
B
Explanation :
Economic rent is the surplus payment received by a factor of production over and above the minimum amount required to induce it to remain in its current use. When the supply curve for a factor of production is perfectly elastic (infinitely elastic), this means that there are an infinite number of alternative factors that could be used instead. As a result, any surplus payment above the minimum required to keep the factor in its current use will simply induce increased supply of the factor from other sources, driving the price down to the level of the minimum required payment. Therefore, economic rent will always be zero when the supply curve for a factor of production is perfectly elastic.
Learning Objectives
- Familiarize oneself with the concept of economic rent and the variables that dictate its behavior.