Suppose There Are No Barriers to Competing for Real Rents

question 40

Multiple Choice

Suppose there are no barriers to competing for real rents. It follows that if real rents exist, people will compete for them

• A)and in the process produce less of the good or service that is connected with the real rents.
• B)and in the process produce more of the good or service that is connected with the real rents.
• C)only if the real rents can be turned into artificial rents and therefore maintained over a long period of time.
• D)only if the real rents are pure economic rents and not simply economic rents.
• E)There is not enough information to answer the question.

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Definitions:

Cross-Price Elasticity

A measure of how the quantity demanded of one good responds to a change in the price of another good.

Substitutes

Goods or services that can be used in place of each other, where an increase in the price of one leads to an increase in demand for the other.

Price Inelastic Demand

A situation where the quantity demanded of a good does not change significantly in response to changes in its price.

Luxury

Goods or services that are considered superior in quality and high in price, often seen as status symbols and not essential for basic needs.