Q1: if land is unlimited in supply, will there be no scarcity rents? True or false...
Q1: if land is unlimited in supply, will there be no scarcity rents? True or false
Q2: with flow if annual rents of 50,000 and a discount rate of 2% what is the present value of land if you can own the land in perpetuity?
Homework Answers
1. True, As it is given that supply of land is unlimited so there will be no scarcity rent. Because, scarcity rent is the cost of "using up" a finite resource as benefits of the extracted resource are unavailable to future generations. Efficiency is achieved when the resource price equals the benefit society is willing to pay for the resource today.
2. Present Value of land =
= 
Present value of land if you can own the land in perpetuity = 25,00,000.
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