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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406

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BuyFindarrow_forward

Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

Bobby is a baseball player who earns $1 million a year playing for team X. If he weren’t playing baseball for team X, he would be playing baseball for team Y and earning $800,000 a year. If he weren’t playing baseball at all, he would be working as an accountant earning $120,000 a year. What is his economic rent as a baseball player playing for team X? What is his economic rent as a baseball player?

To determine

Identify the economic rent.

Explanation

The payment over and above the opportunity cost is called the economic rent. Here, the player earns $1 million in a year for playing team X. If the player does not play for team X, then the player’s alternative salary is $800,000 for playing team Y...

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