The figure given below represents equilibrium in the labor market with the demand and supply curves of labor.Figure 14.6
In the figure,
D = MRP implies demand for labor = Marginal Revenue Product
MFC represents Marginal Factor Cost curve
S represents the supply curve of labor

-Earnings of a resource is termed as economic rent if:
A)it has a perfectly elastic demand.
B)it has a perfectly elastic supply.
C)it has a perfectly inelastic supply.
D)it has a perfectly inelastic demand.
E)it has no demand.

Question

The figure given below represents equilibrium in the labor market with the demand and supply curves of labor.Figure 14.6
In the figure,
D = MRP implies demand for labor = Marginal Revenue Product
MFC represents Marginal Factor Cost curve
S represents the supply curve of labor
 
-Earnings of a resource is termed as economic rent if:
A)it has a perfectly elastic demand. 
B)it has a perfectly elastic supply. 
C)it has a perfectly inelastic supply. 
D)it has a perfectly inelastic demand. 
E)it has no demand.

Quizplus · Accepted Answer

Economic rent occurs when a resource has a perfectly inelastic supply, meaning that the quantity supplied does not change in response to changes in price. This results in a higher price or earning for the resource than what is necessary to bring it into the market. When the demand for a resource is perfectly elastic, the price will be driven to the minimum necessary to keep the resource in the market, and there will be no economic rent. Therefore, option C is the correct answer.

The Figure Given Below Represents Equilibrium in the Labor Market