All the land in a California valley is owned by one person. The supply of land is fixed and is rented each year to farmers who bid for it in an open auction. Given the rents they must pay, the farmers barely earn subsistence. Sympathy for the poor farmers leads the state to bring in irrigation facilities to raise the productivity of the farms and raise the farmers’ income. The most likely outcome is
A. the farmers will be better off.
B. the farmers and the landlord will share the new prosperity.
C. only the landlord will be better off.
D. no one will prosper.
Answer: C
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The difference between the market price of an acre of land and its supply price (including transportation) is
a. land rent b. zero, by definition c. negative d. the price of land e. infinite when the supply of land is fixed
The most a consumer is willing to pay for a product is equivalent to the product's ______.
Fill in the blank(s) with the appropriate word(s)
All of society's applied knowledge on how to produce goods and services is
A) held by university professors. B) called technology. C) opportunity cost. D) efficiency.
The self-correcting tendency of the economy means that falling inflation eventually eliminates:
A. exogenous spending. B. recessionary gaps. C. expansionary gaps. D. unemployment.