Explain the circumstances under which some component of labor income is economic rent.
What will be an ideal response?
Economic rent is a payment to a factor above the opportunity cost of the resource. If an individual has an ability that other workers cannot acquire or a skill which is very difficult to duplicate, then the income earned by that individual will contain an element of economic rent as a return to that unique ability or skill. The supply of labor of such individuals would be described as highly inelastic so that increases in demand results in relatively large increases in earnings.
You might also like to view...
Which of the following is NOT an alternative rule for monetary policy?
A) an inflation rate targeting rule B) a natural unemployment rate targeting rule C) a monetary base instrument rule D) a nominal GDP targeting rule E) a money targeting rule
Phillip is a 22-year old who has no job and is available for work, but has not actively looked for a job in the last month
The Current Population Survey identifies Phillip as ________, ________ the labor force, and ________ the working-age population. A) unemployed; part of; part of B) unemployed; part of; not part of C) not unemployed; not part of; part of D) not unemployed; not part of; not part of E) not unemployed; part of; part of
John has been trying to find a job for the past six months. He went for an interview at Aqua Inc Although his performance was better than that of all the other candidates, the interview board rejected him thinking that they must be missing out on
something about him that other employers have noticed and hence, have not hired him. A(n) ________ has occurred in this case. A) positive externality B) negative externality C) moral hazard D) information cascade
The overriding objective of a cartel is to maximize the amount of profit each of its members can earn through cooperation with the other members
Indicate whether the statement is true or false