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

-If the elasticity of supply of a resource is greater than zero but less than infinity, its income will comprise of:
A)only economic rent.
B)only transfer earnings.
C)salaries and traveling allowances.
D)both economic rent and transfer earnings.
E)salaries, traveling allowances, as well as other incentives.

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
 
-If the elasticity of supply of a resource is greater than zero but less than infinity, its income will comprise of:
A)only economic rent. 
B)only transfer earnings. 
C)salaries and traveling allowances. 
D)both economic rent and transfer earnings. 
E)salaries, traveling allowances, as well as other incentives.

Quizplus · Accepted Answer

If the elasticity of supply of a resource is greater than zero but less than infinity, it means that the supply responds to changes in demand but not perfectly. In this case, the income earned will comprise of both economic rent and transfer earnings. Economic rent is the surplus payment received above the minimum required to induce the supply of a resource, while transfer earnings are the minimum payment required to keep the resource in its current use. Therefore, the correct answer is D, both economic rent and transfer earnings. Salaries, traveling allowances, and other incentives may also be part of the income depending on the specific circumstances, but they are not directly related to the elasticity of supply of the resource.

The Figure Given Below Represents Equilibrium in the Labor Market