Choose the statement that best describes the difference between "economic rent" and other factor payments.
A)Economic rent is the sum of all factor payments.
B)A reduction in economic rent will not reduce the availability of the factor whereas reducing other payments of factors will reduce their availability.
C)Economic rent is unearned income of the factor whereas other payments are earned.
D)There is no difference between economic rent and other factor payments.
E)Economic rent is not a cost to the firm but other payments are.

Question

Quizplus · Accepted Answer

Economic rent is a payment made to a factor of production that is in excess of what is required to maintain that factor in its current use. It is unearned income and is not a cost to the firm. Other factor payments, such as wages, salaries, and interest payments, are payments for the services of the factors of production. A reduction in economic rent would not affect the availability of the factor in question, whereas reducing the other factor payments would reduce their availability. Therefore, option B is the correct choice.

Choose the Statement That Best Describes the Difference Between "Economic