Understanding Transfer Earnings and Economic Rent in Labor Markets

The video tutorial explains the concepts of economic rent and transfer earnings in the labor market. It defines transfer earnings as the minimum wage required to prevent a worker from switching jobs, while economic rent is the excess payment above this minimum. The tutorial uses examples and graphs to illustrate these concepts and discusses how the wage elasticity of supply affects the balance between transfer earnings and economic rent.

What is the primary difference between transfer earnings and economic rent?

• Transfer earnings are bonuses, while economic rent is the base salary.

• Transfer earnings are the maximum wage a worker can earn, while economic rent is the minimum.

• Transfer earnings are the minimum wage required to keep a worker, while economic rent is any wage above that.

• Transfer earnings are wages paid to new employees, while economic rent is for existing employees.

In the given example, if a worker is paid £750 but would stay for £500, what is the economic rent?

• £250

• £500

• £750

• £1000

How is the labor market equilibrium represented on a graph?

• With a horizontal demand curve and a vertical supply curve

• With a downward sloping demand curve and an upward sloping supply curve

• With a vertical demand curve and a horizontal supply curve

• With two parallel lines

What does the area above the labor supply curve and below the equilibrium wage represent?

• Transfer earnings

• Economic rent

• Total wages

• Labor demand

What is a major determinant of the size of transfer earnings and economic rent in a labor market?

• The average age of workers

• The level of government intervention

• The number of workers

• The wage elasticity of supply

How does an inelastic labor supply curve affect transfer earnings and economic rent?

• It increases both transfer earnings and economic rent

• It increases transfer earnings and decreases economic rent

• It has no effect on either

• It decreases transfer earnings and increases economic rent

What happens to economic rent when the labor supply curve is more elastic?

• Economic rent increases

• Economic rent decreases

• Economic rent remains the same

• Economic rent becomes negative