Economics • Economic BasicsMedium
What is the primary premise of the 'Ricardian Theory of Rent'?
A. Rent arises due to the original and indestructible powers of the soil and the differences in soil fertility and location✓ Correct Answer
B. Rent is determined solely by the amount of labor capital invested by the tenant farmer
C. Rent is a monopoly price charged by landowners with no relation to agricultural productivity
D. Rent fluctuates entirely based on the international price of grain imports
💡 Solution & Explanation
David Ricardo formulated the classical theory of rent, arguing that economic rent arises from differences in the original and indestructible powers of the soil and variations in geographical location. This theory rejects the notion that rent is determined by labor cost or monopoly pricing. Ricardian rent theory forms a cornerstone of classical economic distribution models alongside wages and profits.
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