Microeconomics (MindTap Course List)
10th Edition
ISBN: 9781285859484
Author: William Boyes, Michael Melvin
Publisher: Cengage Learning
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Question
Chapter 18, Problem 1E
To determine
(a)
Economic rent and transfer earning
Expert Solution
Explanation of Solution
The given
Graph showing the Economic rent in the perfectly
The area ABCD represents the All Economic rent; there are no transfer earnings since the same amount would be supplied at a
Economics Concept Introduction
Introduction:
Economic rent is the amount paid to the factor of production which is excess of what is economically or socially necessary.
Transfer earning is the minimum amount which is to be paid so that labour do not move to other occupation.
To determine
(b)
Impact on economic rent and transfer earning when demand increases.
Economic rent and transfer earning
Expert Solution
Explanation of Solution
If the demand increased, there would be a shift in the demand curve to the right resulting the price increased from $ A to $ E.
The price in increase therefore results in the increase of economic rent.
Economics Concept Introduction
Introduction:
Economic rent is the amount paid to the factor of production which is excess of what is economically or socially necessary.
Transfer earning is the minimum amount which is to be paid so that labour do not move to other occupation.
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2.) Using the line drawing
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plot and label the isocost line.
Carefully follow the instructions above, and only draw the required objects.
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d. Now suppose the price of labour rises to $5 per unit, but the firm still wants to produce 500 tires per day. Explain how a cost-minimizing firm adjusts to this change (with no change in technology).
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▼
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QK
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C
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Isocost line
QL
PL
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isocost line A and isocost line B is that
A. the total cost is larger along B.
B. the total cost is larger along A.
OC. labour is relatively more expensive along A.
○ D. the level of output is lower along A.
OE. both capital and labour are relatively cheaper
along A.
Capital
B
Labour
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