The theory of land rent holds that
A)all plots of land are identical.
B)all land yields a positive rent return.
C)rent on any piece of land will equal the difference between the cost of producing the output on that land and the cost of producing it on marginal land.
D)competition for superior plots of land will force the rent on those lands to a marginal return of zero.

Question

Quizplus · Accepted Answer

The theory of land rent asserts that the rent for any land plot will be equal to the difference between the cost of production on that plot and the cost of production on the least productive land plot, also known as the marginal plot. This is because land is a fixed resource, so as demand for land increases, it is necessary to use less productive land plots to meet that demand, increasing the cost of production. As a result, rent is seen as a surplus above the cost of production on the least productive land plot, and the amount of rent is determined by the productivity of the land plot in question relative to the least productive land plot.

The Theory of Land Rent Holds That