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

-The more inelastic the supply of a particular resource:
A)the higher are its transfer earnings.
B)the higher is its economic rent.
C)the higher are its total earnings.
D)the higher is the elasticity of demand for the resource.
E)the lower is the elasticity of demand for the resource.

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
 
-The more inelastic the supply of a particular resource:
A)the higher are its transfer earnings. 
B)the higher is its economic rent. 
C)the higher are its total earnings. 
D)the higher is the elasticity of demand for the resource. 
E)the lower is the elasticity of demand for the resource.

Quizplus · Accepted Answer

Inelastic supply of a resource means that the quantity supplied is not very responsive to changes in its price. This leads to a higher economic rent, which is the excess payment received by the resource owner above and beyond the minimum amount required to induce the resource's supply. Therefore, option B is correct. The other options are incorrect because transfer earnings and total earnings depend on both demand and supply factors, while elasticity of demand is irrelevant in this context.

The Figure Given Below Represents Equilibrium in the Labor Market