exercise-rents-monopolies-key - Name_key Row I Economic...

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1 Name _______________key_______ Row ____________________________ I. Economic Rent. Under perfect competition, if firms earn economic profits (returns greater than opportunity costs), new firms will be attracted into the market until economic profits are driven down to zero (e.g. returns that cover opportunity costs.) If there is a fixed or very limited input, we may have a situation in which we have "economic rent." Economic rent is the part of a payment for an economic resource that exceeds the owner's reservation price. Economic rent will not be pushed to zero because the input is unique, can't easily be replicated, or government actions place a constraint upon the input. Look at the situations listed below and circle those you think might involve economic rent. 1) The pay of workers at a local fast food restaurant. 2) The salaries earned by top players in the NBA. 2) Rental rates for housing in a city that does not have rent control or other interventions in the market. 3) The cost of a liquor license in a city that tightly limits the number of licenses it sells. II. Cost-saving inventions . Throughout the twentieth century, improvements in agricultural technology raised yields considerably
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This note was uploaded on 11/15/2011 for the course AGEC 7100 taught by Professor Duffy,p during the Fall '08 term at Auburn University.

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exercise-rents-monopolies-key - Name_key Row I Economic...

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