All of the payment to a factor of production will be economic rent when the factor of production has:
A) an infinitely inelastic supply curve.
B) an infinitely elastic supply curve.
C) a constant, unit elastic supply curve.
D) an infinitely inelastic demand curve.

Question

Quizplus · Accepted Answer

Economic rent occurs when the supply curve of a factor of production is infinitely inelastic, meaning that even with an increase in demand for the factor, the quantity supplied cannot be increased. This allows the owners of the factor to charge a higher price and receive economic rent. With a perfectly elastic supply curve (choice B) or a constant, unit elastic supply curve (choice C), the factor owners cannot charge a higher price as any increase in price will result in a decrease in demand. An infinitely inelastic demand curve (choice D) is not relevant to the concept of economic rent.

All of the Payment to a Factor of Production Will