Markets for Factors of Production LOSH习题精选 economic, potential, occupation, difference, 2010

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LOS h: Differentiate between economic rent and opportunity costs.

Hazel Green, CFA, earned $90,000 last year working as a derivatives analyst. She is also a skilled web page designer. Green could earn $70,000 per year in that occupation, which she has determined is her next-highest paying alternative. The difference between Green’s income as a derivatives analyst and her potential income as a web page designer is best described as:

A) opportunity cost.

B) economic rent.

C) marginal revenue product.

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Economic rent to a worker is the difference between what she earns and what she could earn in her next highest paying alternative employment. Her potential earnings in her next highest valued employment is her opportunity cost. Marginal revenue product (MRP) is the revenue from selling the output of one additional unit of an input. A high MRP makes it possible for a worker to earn economic rent.

 

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Which of the following statements about the economic rent to a natural resource is most accurate?

A) The entire payment for a non-renewable natural resource is economic rent.

B) The entire payment for a renewable natural resource is economic rent.

C) The proportion of economic rent in the payment for a renewable natural resource depends on the elasticity of demand for the resource.

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When the supply curve is perfectly inelastic, as it is for a renewable natural resource, the entire payment for the resource is economic rent. When the supply curve is perfectly elastic, as with a non-renewable natural resource, none of the payment is economic rent.

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Under which pair of conditions is a factor of production least likely to earn economic rent?

Supply curve

Demand curve

A) Perfectly inelastic Perfectly elastic

B) Upward sloping Downward sloping

C) Perfectly elastic Downward sloping

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If the supply of a productive resource is perfectly elastic, it earns no economic rent. Elasticity of demand is not directly related to economic rent.

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A worker is most likely to earn economic rent when the marginal revenue product (MRP) from her labor and the supply curve for her type of labor exhibit which of the following characteristics?

MRP

Supply curve

A) High More elastic

B) Low Less elastic

C) High Less elastic

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Economic rent is the difference between the price paid for a resource and its opportunity cost in its next-highest-valued employment. To earn economic rent, a worker must generate a high marginal revenue product. The less elastic its supply curve, the more of the wage is economic rent. Popular entertainers and professional athletes, for example, earn economic rent because their services are valued much more highly in those occupations (high MRP) than they would be in their next-best alternative, and very few people possess their specific skills (inelastic supply).