Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Chapter 18, Problem 2TY
To determine
Calculate the economic rent for the machines.
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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.
A manufacturing company leases a machine for $31,000 per year. Each unit produced costs $36 in labor and
$65 in materials. To break even, 21,000 units must be sold. What is the price of the product?
Consider a firm producing Smirnoff Mule which uses two inputs-machines and labor-to
produce output (Q). The amount paid to a unit of machine input is called rent; on the other
hand, the amount paid to the unit of labor is called the wage rate. If the wage rate is at
P500/unit and the rent for the machine is at P1200/unit, given the following table:
TABLE 2
Output
0 10 20 30 40 50 60 70
Machine Inputs 30 30 30 30 30 30 30 30
Labor Inputs
60 110 150 210 310 450 630
6. Compute for the firm's TV C, TFC, TC, AV C,AFC, AC, and MC. (Show your formulas).
Chapter 18 Solutions
Economics: Principles & Policy
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