The figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock.Figure 17.2

-When does a resource earn only economic rent?

Question

The figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock.Figure 17.2
 
-When does a resource earn only economic rent?

Quizplus · Accepted Answer

Economic rent is earned only when the supply curve of the resource is vertical. In this case, the supply of the resource is fixed, and any increase in demand for it leads to an increase in its price, but not in its quantity supplied. As a result, the resource earns only economic rent, which is the surplus earned over and above the resource's opportunity cost of production.

The Figure Given Below Shows the Demand [D and D']