Suppose That a Large Lake in the Middle of Minnesota

question 8

Multiple Choice

Suppose that a large lake in the middle of Minnesota evaporates, leaving more fertile farm land for growing corn available. Assuming that land and labor are complements in a farming production function, what would happen to the wages earned by workers and rents earned by landowners?

• A)Both wages and rents would increase.
• B)Both wages and rents would decrease.
• C)Wages would increase, and rents would decrease.
• D)Wages would decrease, and rents would increase.

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Definitions:

Herfindahl Index

A measure used to calculate the level of concentration in a market, indicating the competitiveness of the market.

Market Shares

The portion of a market controlled by a particular company or product, often expressed as a percentage of total sales in that market.

Legal Cartel Theory

A hypothesis that explores the conditions under which regulatory frameworks and laws allow for the existence and operation of cartels, which are otherwise illegal agreements among competitors to control prices or supply in a market.

Production Costs

Production costs refer to the total expenses incurred in the manufacture of a product, including labor, materials, and overhead costs.