Bundle: Microeconomics, Loose-leaf Version, 10th + Mindtap Economics, 1 Term (6 Months) Printed Access Card
10th Edition
ISBN: 9781305782570
Author: William Boyes; Michael Melvin
Publisher: Cengage Learning
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Chapter 18, Problem 4E
To determine
Economic rent of a movie star who earns millions of dollar.
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Grace owns a house. She can rent her house for two years to one tenant for a profit of $24,000 a year, or she can rent it to two tenants each year for a profit of $10,000 per tenant per year. Calculate the economic rent over the course of two years of renting to one tenant.
Nick's salary is pure economic rent. What does this statement imply about Nick's next best alternative salary?
If the MRP of land is greater than its price, a firm should
O use less land.
use more land.
try to increase the productivity of land.
decrease the price it is willing to pay for land.
Chapter 18 Solutions
Bundle: Microeconomics, Loose-leaf Version, 10th + Mindtap Economics, 1 Term (6 Months) Printed Access Card
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- Consider the following example: Jordan currently works for a corporate law firm. She is considering opening her own independent legal practice, where she expects to earn $300,000 per year once she gets established. To run her own firm, she willI have to give up her current job with a salary of $165,000 and will incur the following annual expenses: Rent 22,490 Salary-Legal Assistant Computer Software License Office Supplies 21,830 120 800 Internet Subscription 1,750 How much are Jordan's explicit costs? Number How much is Jordan's accounting profit? Number How much are Jordan's implicit costs? Number How much is Jordan's economic profit? Number Assume Jordan values her leisure time at $80/hour, and starting her own firm would require her to put in 15 more hours than at the corporate firm: What is the change in Jordan's explicit costs? Number What is the change in Jordan's implicit costs? Numberarrow_forwardIn 2004, Safari Corporation’s total sales reached $1.2 million. By 2010, sales had climbed to $4.25 million. What is the growth in sales for Safari Corporation per year?arrow_forwardWhat does it mean that “ideally, utilization should be limited by demand and not setup or down time”? Would it happen in a push or pull system?arrow_forward
- Loessing Compan produced and sold 12,000 units last year with sales price of $45 per unit and unit variable cost of $20. Fixed costs totaled $250,000. In the coming year, Loessing expects price to decrease by ten percent. Neither unit variable cost nor fixed costs can be changed. If Loessing wants to maintain the same level of income, what will the new level of production need to be?arrow_forwardRecall our example of t-shirt manufacturing in Lubbock. You started the business with your friend and selling each t-shirt for $10. However, people are not buying from you. Why is that happening? Now you figured that there are cheaper means to produce each t-shirt at $7 and you changed your t-shirt price to $9 making some positive economic rent. Will this last forever? Why or why not?arrow_forwardA carpenter quits his job at a furniture factory to open his own cabinetmaking business. In his first two years of operation, his sales average $100 000 per year and his operating costs for wood, workshop and tool rental, utilities, and miscellaneous expenses average $70 000 per year. Now his old job at the furniture factory is again available. What is the lowest wage at which he should decide to return to his old job? Why?arrow_forward
- Don Juan Perez runs a seafood restaurant on the central coast. His total income last year was $150,000. The rent was $48,000 per year. His labour costs were $42,000 and materials, food and other variable costs were $20,000. Don Juan Perez was going to work as a cookbook writer where he would have earned $40,000 per year, or as a chef de cuisine in another restaurant, where he would have earned $35,000. The economic utility of Don Juan Perez is: Note: the answer is 0 (zero). Please clarify with calculations why this is the correct alternative.arrow_forwardWhat is the relationship between the rent gradient and transportation costs in a homogeneous monocentric city?arrow_forwardBriefly definearrow_forward
- on-the-job experience typically enhances a person's productivity in that partical job. if the person's salary increases to reflect increased experience but the additional experience has no relevance for other jobs, does this higher salary reflect an increased in opportunity cost or in economic rent?arrow_forwardUsing the following information to answer the below question Suppose David incurs the following monthly cost in his business: Labor ----------------------- $10,000 Rental of equipment ----- $ 5,000 Raw material -------------- $ 7,000 He owns the building so he does not pay the usual rent of $900. In addition, he is no longer earning the $800 in interest on the money that he used to establish the business. Calculate David’s economic cost.arrow_forwardRefer to the diagram to the right: Land is the other (fixed) factor of production. Currently the real wage is $15. Calculate the change in land rents due to a $5 increase in the real wage. A Land rents = $. (Enter your response rounded to the nearest dollar. Be sure to include the minus sign if necessary.) 60- 55- 50 45- 40- 35 30- 25- 20- 15- 10- 5- 0+ 0 Marginal product of labor, MPL 10 Real Wage Real Wage MPL 20 30 40 50 60 70 80 90 100 110 Labor, Larrow_forward
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