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Microeconomics Question from Walter E. Williams:Edit

"Rent is price-determined, not price determining." Explain why this statement is both true and false. In your answer explain what is meant by rent.

AnswerEdit

If by rent, you mean the traditional monthly payment to lease property (real or otherwise) then rent is typically price-determined in a competitive environment. Competing suppliers will bed the price down to meet demand. Exceptions to this rule exist where there is government intervention in the form of price controls. Where ceilings exist, rent can be price determining in that unexpressed rent may be added to other fees to make up the loss (key charges, and other fees). If considering a Tullock type rent, then rent is price determining. The cost of an opportunity will be bid up to the extent of the potential rents to be gained from that opportunity. Therefore the price of the opportunity is determined by the rents.

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