When a factor of production is in fixed supply,the revenue it earns
A) consists entirely of rent.
B) is an efficiency wage.
C) is independent of how the resource is used.
D) consists entirely of deadweight loss.

Question

Quizplus · Accepted Answer

When a factor of production is in fixed supply, its earning is known as rent. Rent refers to the payment made for the use of a fixed factor of production. This payment is usually made to the owner of the factor of production as long as the factor is used. Therefore, the revenue earned by a fixed factor of production is entirely rent.

When a Factor of Production Is in Fixed Supply,the Revenue