Chapter 70, Problem 6MCQ

To determine

What the entire payment for land in fixed supply constitutes?

Answer to Problem 6MCQ

From the available options, the correct option is economic rent.

Explanation of Solution

The price which is paid to use the land or any other natural resources that are fixed in total supply refers to the economic rent. It shows the perfectly inelastic supply of resources, which means the correct option is d (economic rent).

Other options such as tax, deadweight loss, subsidy, and price discrimination cannot involve the entire payment of land as if tax is charged on natural resources, which are fixed in supply such as land, then there would be no deadweight loss. Therefore, the correct option is d.

Economics Concept Introduction

Introduction: Supply is the availability of goods and services in the market, which can be sold to consumers and fixed supply is the constant supply of goods in the market.