The demand and supply curves shown below apply to a competitive market for a factor used in the production of widgets. FIGURE 13-2
-Refer to Figure 13-2.This factor market is in equilibrium at point B.Which of the following statements best describes factor payments at point B?
A)total income paid to the factor is $8
B)total of economic rent plus transfer earnings is $320
C)total factor earnings are $320 and the 40th unit earns zero rent
D)total factor earnings are $320 and the 40th unit earns economic rent of $8
E)economic rent to the 40th unit is $320

Question

The demand and supply curves shown below apply to a competitive market for a factor used in the production of widgets.  FIGURE 13-2
-Refer to Figure 13-2.This factor market is in equilibrium at point B.Which of the following statements best describes factor payments at point B?
A)total income paid to the factor is $8 
B)total of economic rent plus transfer earnings is $320 
C)total factor earnings are $320 and the 40th unit earns zero rent 
D)total factor earnings are $320 and the 40th unit earns economic rent of $8 
E)economic rent to the 40th unit is $320

Quizplus · Accepted Answer

At point B, total factor earnings are $320, and since the 40th unit is the marginal unit, it earns zero economic rent.

The Demand and Supply Curves Shown Below Apply to a Competitive