Suppose maple syrup is illegal in the country of Pancake.If there are two ways to smuggle maple syrup into Pancake: one through overland and one by sea.If the proud Pancakian coast guard is able to arrest all who attempt to smuggle syrup by sea, what would the theory of rent predict?
A)The production costs of smuggling syrup by sea will fall to zero as the use of the sea route falls to zero.
B)The increased rents to maple syrup will reduce demand for maple syrup.
C)Rents for using the land route will increase, making syrup smugglers on net better off.
D)Rents for using the land route will increase, but syrup smugglers on net will likely not be better off.

Question

Quizplus · Accepted Answer

The theory of rent predicts that if one smuggling route (sea) becomes unavailable due to effective law enforcement, demand for the alternative route (land) will increase. This increased demand for the land route will likely raise the costs (or "rents") associated with using it, as it becomes the only option for smuggling maple syrup into Pancake. However, the overall profitability for smugglers may decrease due to these increased costs, making them on net likely not better off.

Suppose Maple Syrup Is Illegal in the Country of Pancake