Difference between economical rent and ordinary rent.
Explanation of Solution
In everyday life, the term rent is used to explain the payment that is made for the legal borrowing of some goods and services. For example – One pays rent for the use of a flat or apartment; one can also pay the equipment rental company for borrowing equipments. This rent is a part of capital cost of the commodity, added to the maintenance and share of taxes. On the other hand, according to an economist, economic rent is the payment made for the use of land and other natural resources which has fixed supply. For example – Rent on land. No matter how high or low the rent, the same amount of land will be available.
Now, explaining the given statement in the quotation, the land has alternative uses. To use the land in the most way, individuals and firms must compete with each other, and the winners are those who pays the highest rent. This bidding makes sense if the winner expects to make use of the land in the most productive manner than the losers.
Concept introduction:
Rent in everyday life: In everyday life, the term rent is used to explain the payment that is made for the legal borrowing of some goods and services. For example – one pays rent for the use of a flat or apartment; one can also pay the equipment rental company for borrowing equipments. This rent is a part of capital cost of the commodity, added to the maintenance and share of taxes.
Rent in terms of economics: According to an economist, economic rent is the payment made for the use of land and other natural resources which has fixed supply. For example – Rent on land. No matter how high or low the rent, the same amount of land will be available.
Want to see more full solutions like this?
Chapter 18 Solutions
ECONOMICS W/CONNECT+20 >C<
- Suppose that you own a 10-acre plot of land that you would like to rent out to wheat farmers. For them, bringing in a harvest involves $30 per acre for seed, $80 per acre for fertilizer, and $70 per acre for equipment rentals and labor. With these inputs, the land will yield 40 bushels of wheat per acre. If the price at which wheat can be sold is $5 per bushel and if farmers want to earn a normal profit of $10 per acre, what is the most that any farmer would pay to rent your 10 acres? What if the price of wheat rose to $6 per bushel?arrow_forward. Suppose that a car dealership wishes to see if efficiency wages will help improve its salespeople’s productivity. Currently, each salesperson sells an average of one car per day while being paid $20 per hour for an eight-hour day. LO17.8 What is the current labor cost per car sold? Suppose that when the dealer raises the price of labor to $30 per hour the average number of cars sold by a salesperson increases to two per day. What is now the labor cost per car sold? By how much is it higher or lower than it was before? Has the efficiency of labor expenditures by the firm (cars sold per dollar of wages paid to salespeople) increased or decreased? Suppose that if the wage is raised a second time to $40 per hour the number of cars sold rises to an average of 2.5 per day. What is now the labor cost per car sold? If the firm’s goal is to maximize the efficiency of its labor expenditures, which of the three hourly salary rates should it use: $20 per hour, $30 per hour, or $40 per hour?…arrow_forwardTo raise money for a new business, a friend asks you to loan her some money. She offers to pay you $3,000 at the end of four years. How much should you give her now if you want to earn 12% interest per year on your money? Select one: O a. 1,906.56 O b. 6,034.08 O c. 1,859.23 O d. 1,491.54 O e. 4,720.56 How much should be put in an investment with a 10% effective annual rate today to have $10,000 in five years? (Using the factor table for 10%) Select one: O a. $ 7,285 O b. $ 8,285 O c. We need more data to solve this question O d. $ 6,209 O e. $ 6,285 Bank X is offering simple interest of 5% per year on savings. Bank Y is offering 6% per year compound interest. For $1,000 principal which offer is more attractive if we wish to keep our savings in the bank for 3 years? Choose the value for your decision. Select one: O a. 1,180.00 O b. 1,191.02 O c. 1,157.63 O d. 1,150.00 O e. 1,250.70arrow_forward
- The graph below shows the market for oats. Price per bushel 10 9 8 7 6 LO 5 4 3 2 1 0 15 45 30 75 105 135 120 150 60 90 Quantity per period (in millions of bushels) D Tools S₂ (i)arrow_forward1.arrow_forward7. Find TC, AFC, AVC, AC, and MC from the following table: (LO11-3) Units 0 -~ m +5 2 3 $200 200 200 200 200 200 CONDAIRE VC $0 20 30 35 50 80arrow_forward
- acroeconómic Policy and Natural Resources (10)|| Sp Time left 1:23:57 estion When a par ar firm is fully utilizing its capital, its output is given by Y = 10 × LO5. The cost of labour is OMR1 per unit. To maximize profit, how many units of labour should this firm use? wer saved -ked out of Flag O a. 50 estion O b. 100 О с. 5 O d. 25 O e. 3.16 CLEAR MY CHOICE NEXT PAGE PREVIOUS PAGE CET 0001 A 人 hparrow_forwardSuppose that you own a 10 acre plot of land that you would like to rent out to wheat farmers. For them, bringing in a harvest involves $30 per acre for seed, $80 per acre for fertilizer, and $70 per care for equipment rentals and labor. With these inputs, the land will yield 40 bushels of wheat per acre. Now suppose the price at which wheat cab be sold is $7 per bushel and that farmers want to earn a normal profit of $10 per acre. What is the most that any farmer would pay to rent your 10 acres? What if the price of wheat rose to $8 per bushel?arrow_forwardIf you borrow $3,000 at 6% simple interest per year for seven years, how much will you have to repay at the end of seven years Select one: O a. non O b. $4,260 O c. $1,260 O d. $3,000 O e. $4,511arrow_forward
- Employment 0 1 2 3 4 5 6 Labor Demand Data Total Product 0 15 28 о Multiple Choice о O $18 $17 39 48 55 60 $15 $16 Product Price $2.20 2.00 1.80 1.60 1.40 1. 20 1.00 The table shows labor demand data on the left and labor supply data on the right. What will be the profit-maximizing wage rate? Labor Supply Data Employment 0 1 2 3 4 LO 5 6 Wage Rate $15.00 16.00 17.00 18.00 19.00 20.00arrow_forwardVinuarrow_forward(Only answer number 2 but use the info from number 1 on an excel file to show formulas used)arrow_forward