If the supply curve for a factor is perfectly elastic,the payments to the factor are
A)wholly economic rent.
B)wholly transfer earnings.
C)partly economic rent and partly transfer earnings.
D)neither economic rent nor transfer earnings.
E)an unnecessary tax on the factor.

Question

Quizplus · Accepted Answer

If the supply curve for a factor is perfectly elastic, it means that the factor can be obtained in any quantity at a certain price, which is the transfer earnings of the factor. Economic rent only exists when the supply curve is not perfectly elastic, and there are limited factors available at different prices. Therefore, the payments to the factor in this case will be wholly transfer earnings.

If the Supply Curve for a Factor Is Perfectly Elastic,the