The average cost of the firm when economic rent is included as a cost is called
A) rent-exclusive average cost
B) rent-controlled fixed cost
C) rent-inclusive average cost

Question

Quizplus · Accepted Answer

Economic rent is the payment made to a factor of production (such as land) in excess of what is needed to keep it in its current use. Therefore, when economic rent is included as a cost, the average cost of the firm increases. Hence, the correct term for this cost is rent-inclusive average cost. Options A and B are incorrect as they do not accurately describe the concept of incorporating economic rent as a cost.

The Average Cost of the Firm When Economic Rent Is