Chapter 21: Q.19 (page 484)
Take a look at Figure 21-1. Suppose that Q = 10 acres and P = $2000 per acre. What is the dollar amount of economic rents received during the current period, and why is this amount classified as economic rents?
the dollar amount of economic rents is
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Reconsider Table 21-1, and assume that as in Problem 21-23, you wish to save enough this year to have \( 50,000 available for your planned retirement 30 years into the future. How many dollars would you have to save this year to ensure that a total amount of \) 50,000 would be accumulated 30 years into the future if the interest rate appropriate for discounting decreases to 3 percent?
Which of the following individuals would you expect to have a high level of economic rent, and which would you expect to have a low level of economic rent? Explain why for each.
Suppose that you are tryang to dectoe whether to spend on stocks issued by WildWeb or on bonds issued by the same company. There is a 50 percent chance that the value of the stock will rise to at the end of the year and a 50 percent chance that the stock will be worthless at the end of the year. The bonds promise an interest rate of 20 percent per year, and it is certain that the bonds and interest will be repaid at the end of the year.
a. Assuming that your time horizon is exactly one year, will you choose the stocks or the bonds?
b. By how much is your expected end-of-year wealth reduced if you make the wrong choice?
c. Suppose the odds of success improve for WildWebi Now there is a 60 percent chance that the value of the stock will be at year's end and only a 40 percent chance that it will be worthless, Should you now choose the stocks or the bonds?
d. By how much did your expected end-of-year wealth rise as a result of the improved outlook for WidWeb?
An individual leaves a college faculty, where she was earning a year, to begin a new venture. She invests her savings of , which were earning percent annually. She then spends renting office equipment, hires two students at a year each, rents office space for , and has other variable expenses of . At the end of the year, her revenues are . What are her accounting profit and her economic profit for the year?
In Problem , that you have now operated your consulting firm for a year. At the end of the first year, your total revenues are . Based on the information in Problem , what is the accounting profit, and what is your economic profit?
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