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- Define “economic rent” and identify the market structure that generates the highest economic rent.
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- Who gave the modern theory of rent in economicsTo protect the well-being of the tenants, some legislators in Hong Kong suggest imposing a rent control. Explain the effects of a rent control on the market for rental housing, changes in the behavior of the landlords as a result of, and explain why these imply inefficiency.As you can see from the article in the prior problem, "Rents Hit All-Time Highs amid Job Growth and Low Vacancy Rates," some people move out as a result of rent increases, while others are ready to pay an even higher rent. Rent control adds yet another aspect by setting a ceiling on what the rental price can ultimately rise to. The supply and demand model can be used to illustrate the mechanism that leads to all these different market outcomes. Consider the market for rental properties in Los Angeles and Orange counties in Southern California. Suppose that while average earnings increased by about 10% in Los Angeles and Orange counties, the average rent has increased by 20%. (Assume for a moment that there are no rent control regulations.) Adjust the following graph to illustrate the rent increase by either using the black point (cross symbol) or by shifting the supply and demand curves. Hint: Determine whether this scenario leads to a shift in the demand/supply curve or a movement…
- Briefly explain whether landlord play a key role in keeping the price of properties and land highQuestion 13.13. Which of the following is a consequence of rent controls established to keep housing affordable for the poor? Less rental housing is available as prospective landlords find it unprofitable to rent at restricted prices. The quality of rental housing declines as landlords lack the funds and incentive to maintain properties. Apartment buildings are torn down in favor of office buildings, shopping malls, and other buildings where rents are not controlled. All of the above are consequences of rent controls.State whether the following is true or false Pure economic rent occurs when the opportunity cost of a resource is zero and there is a positive price for that resources in the market
- Consider the markets for factors of production, such as labor and land, to produce oranges in California in 1935. During this time period-known as the Dust Bowl-major dust storms caused residents of Kansas to migrate west to such states as California and Washington. Using the example of the Dust Bowl, illustrate the effects of this influx of migrants on the market for labor in California on the following graph. Assume the marginal product of workers in California remains the same in spite of the migrant workers. Narket for Laber -O- Supply Demand Supply Dumand LABOR From the graph, you can deduce that the migration of workers leads the equilibrium wage rate in California to Now consider the effect this change in the labor market has on the land market. In particular, think about the effect of the wage change you just found on the market for agricultural land in California. WAGE2) The demand for labor by an industry is given buy the curve L = 900 - 20w, where L is the labor demanded per day and w is the wage rate. The supply curve is given by L = -100 + 20w. a. b. What is the wage rate and quantity of labor hired? What is the economic rent earned by workers?Are the statements below true or false? Briefly explain why you have chosen your answer f)Under a “Pure Wage Contract" in agriculture, the wage is simply equal to the fixed rent of the contract.
- How does the economist’s use of the term “rent” differ from everyday usage? Explain: “Though rent need not be paid by society to make land available, rental payments are useful in guiding land into the most productive uses.”Grace owns a house. She can rent her house for two years to one tenant for a profit of $24,000 a year, or she can rent it to two tenants each year for a profit of $10,000 per tenant per year. Calculate the economic rent over the course of two years of renting to one tenant.Economists Conclude that a tax on the revenues of firms will be shifted in part to consumers of the products of those firms in the form of higher prices. However, they believe that a tax on the rent of land usually cannot be shifted and must be paid entirely by the landlord. What explains the difference?