If the Supply Curve for a Factor Is Perfectly Inelastic

question 88

Multiple Choice

If the supply curve for a factor is perfectly inelastic, the payments to the factor are

• A) neither economic rent nor transfer earnings.
• B) wholly economic rent.
• C) an unnecessary tax on the factor.
• D) partly economic rent and partly transfer earnings.
• E) wholly transfer earnings.

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Definitions:

Fixed Costs

Overheads such as rent, salaries, and insurance that do not fluctuate with the level of goods produced or sold.

Variable Costs

Charges that vary in relation to the volume of output or services provided by a firm.

Fixed Costs

Expenses that do not change regardless of the level of production or business activity, such as rent, salaries, and insurance.

Selling Price

The amount of money for which an item is sold, potentially different from listing or cost price due to discounts or negotiations.