Define the term rent. Explain why confiscation of rents would cause more than a simple transfer of income from resource owners to the government.
What will be an ideal response?
Rent is any payment made to a resource in excess of the minimum amount needed to call it into existence; it is the producer's surplus earned by the resource owner. If the government confiscated all rents, certainly income would be transferred from resource owners to the government. In this situation, however, the resource owner will be indifferent regarding to whom he should supply the resource-the owner will receive the same payment regardless of the demander. Thus there is no guarantee that the resource will be supplied to those demanders who value it the most. Without the price system to guide the resource owners, resources will be misallocated and social loss will occur.
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If we compare a perfectly competitive market to a single-price monopoly with the same costs, the monopoly sells
A) the same quantity at a higher price. B) a smaller quantity at a higher price. C) a larger quantity at a lower price. D) a larger quantity at a higher price. E) a smaller quantity at the same price.
When a country allows trade and becomes an exporter of goods both domestic consumers and domestic producers benefit
a. True b. False Indicate whether the statement is true or false
The marginal benefit of pollution abatement is the
A) additional cost to clean up an additional unit of pollution. B) additional benefit from cleaning up an additional unit of pollution. C) total social costs of pollution clean-up divided by total social benefits. D) total social costs of pollution clean-up divided by the total units of clean-up.
Refer to the table. Equilibrium GDP is:
A. $40.
B. $70.
C. $100.
D. $130.