Question

David Ricardo, a nineteenth-century economist, wrote, "The price of corn is high not because a rentis paid, but a rent is paid because the price of the corn is high." Which of the following correctlyexplains Ricardo's assertion?
1. The high rents landowners charge tenant farmers cause high corn prices.
2. If landowners weren't so greedy and lowered the rents they charge tenant farmers, theprice of corn would fall.
3. If the price of corn rises because of increased demand for corn, land rents will rise toabsorb most of the extra revenue received by tenant corn farmers.
4. If the price of corn rises, all other things being equal, increases in rent will cause sometenant farmers to stop growing corn

Answer 1

Answer:

The correct answer is the option 3: if the price of corn rises because of increased demand for corn, land rents will rise to absorb most of the extra revenue received by tenant corn farmers.

Explanation:

To begin with, in David Ricardo's statment it is established that ''the rent is paid because the price of the corn is high'' therefore it is understandable that it is stated that the price of the corn is not a cause of the rent but it is the opposite, the price causes the rent due to the fact that the rent is not a cost that has to go within the price but the price goes first and then the rent happens. Therefore that if there it an increase in the population and that causes and increase in the demand of the corn, then the price will rise and consequently the rent will rise to in order to obtain the most of the extra revenue that it can.