The greater the economic rent as a proportion of total earnings,_____
A)the less elastic the resource supply.
B)the more elastic the resource demand.
C)the more elastic the resource supply.
D)the less elastic the resource demand.
E)the more elastic the firm's supply of its final product.

Question

Quizplus · Accepted Answer

Economic rent refers to the income received by a factor of production that is above the minimum income required to keep it in its present use. When economic rent is a larger proportion of total earnings, it means that the resource is relatively scarce and its supply is less elastic. This is because producers are willing to pay a higher price to secure the use of the resource, indicating that they are not able to find substitutes easily. Therefore, the resource supply becomes less elastic.

The Greater the Economic Rent as a Proportion of Total