A supplier of a factor of production has a reservation price of $100.The purchaser of the factor of production has a reservation price of $200.If the factor of production is unique,then:
A)there will be no transaction as the reservation prices are unequal.
B)the transaction will occur and the price will be $150.
C)the transaction will occur and the price will be $200.
D)the transaction will occur and the price will be $100.

Question

Quizplus · Accepted Answer

Economic rent is bid up to prevent a unique factor from moving to another firm.Here,the purchaser of the factor will be willing to pay his reservation price to prevent the unique factor from going elsewhere.

A Supplier of a Factor of Production Has a Reservation