Chapter 13R, Problem 12MCQ

To determine

The correct option that defines the supply curve of land as compared to the supply curve of capital.

Answer to Problem 12MCQ

Option d is correct.

Explanation of Solution

Explanation for correct option:

d.

Supply curve for land is steeper than the supply curve for capital because the cost increases for the productive land. Supply curve for capital is flatter due to highly responsive behavior of people when there is a change in rental rate and the saving benefits. Steeper supply curve are less elastic as compared to the flatter curves. Therefore, option d is correct.

Explanation for incorrect options:

a.

Supply curve for capital is more flat than the supply curve for land as customers shifts towards saving if there is a change in rental rates. Therefore, option a is incorrect.

b.

Responsiveness is high if there is any change in rental rates which is reflected in supply curve for capital. Therefore, option b is incorrect.

c.

Supply curve for land is steeper than supply curve for land due to less responsiveness. Steeper curves are less elastic as quantity supplied can be infinite at certain price. Therefore, option c is incorrect.

e.

Supply curve for land is steeper as it reflects the cost of increasing the units of the productive land. Therefore, option e is incorrect.

Economics Concept Introduction

Factor of production: Factor of production refers to the components or the resources that are required for producing intangible or tangible products.

Factor income: Factor income refers to returns received by the producer for inserting each factor of production as an input.