Question 1

Rent can be charged for factors of production which have elastic supply curves.

Accepted Answer

Rent is typically associated with factors of production that have inelastic supply curves, as it arises from scarcity and limited availability, leading to economic rent.

Question 2

A resource is inappropriable when some of the costs and benefits associated with its use do not accrue to its owner.

Accepted Answer

Inappropriability occurs when there are externalities, public goods, or common-pool resources that cannot be fully owned or controlled by a single individual or group, leading to costs and benefits that are spread across multiple parties.

Question 3

Low-quality Belgian farmland can earn a higher rent than high-quality Argentine farmland.

Accepted Answer

This statement is true due to a number of factors, including higher demand for European agricultural products, subsidies for European farmers, and the availability of more advanced technology and infrastructure in Europe. It is important to note that this does not necessarily mean that low-quality Belgian farmland is inherently more valuable than high-quality Argentine farmland, but rather that market forces and government policies contribute to different rent levels in different regions.

Question 4

A tax on pure economic rent, such as Henry George advocated, would not tend to distort resource use in the short run.

Accepted Answer

A tax on pure economic rent would not affect the behavior of producers in the short run since it is not related to their production decisions but rather to the value of the land or other natural resources. Therefore, it would not cause market distortions in the short term.

Question 5

Rent does not enter into the cost of production.

Accepted Answer

Rent is one of the fixed costs that a producer incurs in their production process. It is the cost of using a location or a property to carry out the production activities. Therefore, rent must be factored into the overall cost of production.

Question 6

A tax on rent earned by an input should have no effect upon the output price.

Accepted Answer

A tax on rent earned by an input would not directly impact the cost of producing the output. The cost of the input may increase due to the tax, but the producer can still decide what price to sell the output for based on market demand and competition. Therefore, the output price should remain unaffected by the tax on rent earned by an input.

Question 7

Public goods are ones whose benefits are indivisibly spread among the entire community, whether or not individuals desire to consume the public good.

Accepted Answer

Public goods are non-rivalrous (meaning that consumption by one individual does not reduce availability to others) and non-excludable (meaning that it is difficult to prevent individuals from consuming the good). As a result, the benefits of public goods are spread across the entire community, even if individuals do not directly consume or pay for the good.

Question 8

A nonrenewable resource is one whose supply is essentially fixed.

Accepted Answer

Nonrenewable resources are finite and their supply cannot be easily replenished. Once they are depleted, they cannot be replaced within a reasonable timeframe. Examples of nonrenewable resources include fossil fuels, minerals, and metals.

Question 9

From the point of view of the whole community, price-determined rent is a payment for a resource which can be used in any industry.

Accepted Answer

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Question 10

An externality is an activity that imposes involuntary costs or benefits on others, or an activity whose effects are not completely reflected in its market price.

Accepted Answer

This statement accurately defines what an externality is.

Question 11

Charging rents can lessen inefficient "externalities."

Accepted Answer

Charging rents to individuals or businesses can create incentives to use resources more efficiently and reduce the negative impacts of externalities, such as pollution or congestion. By internalizing costs through charging rents, individuals and businesses will be encouraged to reduce their consumption or emissions in order to minimize their costs. This can result in a reduction of overall externalities and a more efficient use of resources.

Question 12

Actions to slow global warming would be considered global public goods.

Accepted Answer

Global public goods are goods or services that are non-excludable (meaning no one can be excluded from using them) and non-rivalrous (meaning one person's use of them does not diminish their availability to others). Actions to slow global warming (such as reducing greenhouse gas emissions) benefit everyone and are not limited to any one individual or group, making them a global public good.

Question 13

Pure economic rent on land of fixed supply is a surplus which can be taxed without causing a decline in productive efficiency.

Accepted Answer

Pure economic rent on land of fixed supply is a surplus that is not earned through any productive effort. Hence, it can be taxed without affecting the supply of land or the willingness of landowners to offer their land for rent. This is because the supply of land is fixed, and the landowner cannot increase or decrease the supply in response to changes in the tax rate. Therefore, taxing pure economic rent would not lead to a reduction in productive efficiency.

Question 14

If a tax is imposed upon the use of an inelastically supplied input with no alternate uses, then you should expect the price of the product to increase dramatically.

Accepted Answer

When a tax is imposed on an inelastically supplied input with no alternate uses, the supply curve is relatively vertical (inelastic), meaning suppliers cannot easily change the quantity supplied in response to the tax. The burden of the tax is more likely to be shared between producers and consumers, rather than leading to a dramatic increase in the product price. The price increase might not be dramatic because the suppliers cannot easily reduce their production, and thus, both parties will absorb some of the tax burden.

Question 15

Economists have determined that to find the socially efficient level of pollution, the marginal social benefit from abatement equal the marginal social costs of abatement.

Accepted Answer

This is known as the "optimal level of pollution" or the "economic efficiency" level of pollution. At this level, the benefits gained from reducing pollution are equal to the costs incurred in doing so. This ensures that the overall welfare of society is maximized.

Question 16

A renewable resource is one whose services are not replenished.

Accepted Answer

A renewable resource is one whose services are replenished naturally or through human intervention, making it sustainable over the long term. Examples include solar energy, wind energy, hydro energy, and biomass.

Question 17

If a factor of production has no alternative uses, there is no efficiency gain from charging rent for its use.

Accepted Answer

Charging rent for a factor of production, even if it has no alternative uses, can still lead to efficiency gains by ensuring that it is allocated to those who value it most and are willing to pay for its use, thereby encouraging its optimal utilization.

Question 18

Rent is calculated as dollars per unit of the fixed factor per unit of time.

Accepted Answer

This statement is true. Rent is typically calculated as a dollar amount per unit of the fixed factor (such as a property, machine, or vehicle) per unit of time (such as per month or per year).

Question 19

Pollution is a negative externality.

Accepted Answer

Pollution is a classic example of a negative externality, where the costs of production (in this case, environmental damage) are not fully borne by the producers but are instead shifted onto society as a whole. This leads to overproduction and an inefficient allocation of resources, as the market fails to reflect the true cost of production.

Question 20

The supply curve for land is completely inelastic, or vertical.

Accepted Answer

The supply of land cannot be increased or decreased, making the supply curve for land completely inelastic and vertical.

Quiz 14: Capital, Interest, and Profits Part Four: Applications of Economic Principles