Economics (MindTap Course List)
Economics (MindTap Course List)
13th Edition
ISBN: 9781337617383
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 29, Problem 2WNG
To determine

Identify the economic rent.

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A 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?
Fred currently works for a corporate law firm. He is considering opening his own legalpractice, where he expects to earn $200,000 per year once he gets established. To run his ownfirm, he would need an office and a law clerk. He has found the perfect office, which rents for$50,000 per year. A law clerk could be hired for $35,000 per year. If these figures areaccurate, would Fred’s legal practice be profitable?
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