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40. What is the difference between opportunity cost and economic rent? Draw a graph to illustrate....

40. What is the difference between opportunity cost and economic rent? Draw a graph to illustrate. This is a micro-econ essay question.

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Answer #1

Opportunity cost refers to the value of the foregone alternative, when making a decision.

Economic rent is the payment made over and above the cost of factors of production. It is the price paid to use the resource and is different from the cost of the resource.

Graphically,

Opportunity cost represents the area under the supply curve till the quantity supplied point.

Economic rent is the area above the supply curve and under the price received by the seller.

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