Exhibit 11-1 Condider Exibit 11-1.Each of the panels depict the supply and demand conditions in a resource market.In which of the panels will the resource earnings reflect partly opportunity cost and partly economic rent?

Question

Exhibit 11-1  Condider Exibit 11-1.Each of the panels depict the supply and demand conditions in a resource market.In which of the panels will the resource earnings reflect partly opportunity cost and partly economic rent?

Quizplus · Accepted Answer

In panel (c), there is excess demand for the resource, which results in the resource earnings being higher than the opportunity cost of production. This leads to economic rent being a component of the resource earnings. In panel (d) and (e), there is excess supply of the resource, which results in the resource earnings being equal to or lower than the opportunity cost of production. Therefore, there is no economic rent component in these panels.