The cost of production on the "bottom forty" is $100,000 for a given size crop.On the "north forty," due to erosion of the soil, the cost is $150,000.If both are being farmed by tenants, we would expect the rent on the "bottom forty" to be
A)$50,000 below the rent on the north forty.
B)$50,000 above the rent on the north forty.
C)different from that on the north forty by an indeterminable amount.
D)$50,000, and the rent on the north forty is $50,000.

Question

Quizplus · Accepted Answer

The rent on the "bottom forty" would likely be higher than on the "north forty" because its lower cost of production ($100,000 vs. $150,000) makes it more profitable or desirable for farming, assuming revenue from the crops is the same for both.

The Cost of Production on the "Bottom Forty" Is $100,000