Very Short Question Answer

What is rent?

Rent is defined as the reward of land for its services in the production process. According to modern theories of rent, rent is the difference between the actual earning and transfer earning.

Define transfer earning with an example.

Transfer earning is defined as the minimum payment required to keep a factor of production in its present use. The payment below this will causes factor to be transfer else where. For example, how much salary that needs to keep doctors in Nepal is the transfer earning. Otherwise, they will migrate to developed countries.

How does rent arise in a perfectly inelastic supply curve f factor?

A factor is said to have perfectly inelastic supply if it has no alternative use. Since, there is no alternative use of the factor, its transfer earning is zero. Therefore, so its whole current earning is rent.

Does the perfectly elastic factor yield rent?

The perfectly elastic factor yields no rent because its current earning equal to transfer earning.

Write down the propositions of modern theory of rent.

The modern theory of rent propounded by Mrs. John Robinson consists of following propositions:

i. Rent can be derived from all factors of production.

ii. Rent occurs due to scarcity of factors of production.

Short Question Answer

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