b. Consider a vacant acre of land that rents for $500,000 per year after taxes. Assume this rent will hold in the future. The discount rate is 7%. What should be the market value of this land for a 5-year tenure. c. Supposed that you were promised an unlimited tenure for the same land as in (b). Compute the market value of this land.

Microeconomics
13th Edition
ISBN:9781337617406
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter16: Interest, Rent, And Profit
Section: Chapter Questions
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b. Consider a vacant acre of land that rents for $500,000 per year after taxes. Assume this rent will hold in the future. The discount rate is 7%. What should be the market value of this land for a 5-year tenure.

c. Supposed that you were promised an unlimited tenure for the same land as in (b). Compute the market value of this land. 

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$3,000
$2,750
$2,500
$2,250
$2,000
$1,750
$1,500
$1,250
$1,000
$750
$500
$250
$0
0
$660
$240
1
ATC
$120
2
$2,620
$60
3
$1,980
$120
4
$1,608
$1,380
$240
$480
$1,251
$840
5
6
7
Output Produced (q)
$1,200
8
$1,200
$1,680
$2,280
9
$1,200
10
$1,342
$1,248
MC
AVC
11
12
Consider the information in the file named Cost Functions
of the Firm (also presented above). Total cost of producing 3
units equals
dollars.
Transcribed Image Text:$3,000 $2,750 $2,500 $2,250 $2,000 $1,750 $1,500 $1,250 $1,000 $750 $500 $250 $0 0 $660 $240 1 ATC $120 2 $2,620 $60 3 $1,980 $120 4 $1,608 $1,380 $240 $480 $1,251 $840 5 6 7 Output Produced (q) $1,200 8 $1,200 $1,680 $2,280 9 $1,200 10 $1,342 $1,248 MC AVC 11 12 Consider the information in the file named Cost Functions of the Firm (also presented above). Total cost of producing 3 units equals dollars.
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