Chapter 18, Problem 2TY

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.

Refer to Table below. Mr. AI-Maashani owns high end wedding cake baking business in Salalah. He leases/rents 4 high tech computer-controlled cake baking machines, for which he pays RO125 per day. He cannot increase the number of machines he leases/rents. He can hire as many workers as he wants at a cost of RO75 per day per worker. These are the only two inputs (cake baking machines and labour) he uses in his cake baking business. Use this information to fill in the columns in the above table.   Number of workers Number of cakes per day Fixed cost Variable cost Total cost Average total cost Marginal cost 0 0           1 10           2 25           3 45           4 60           5 70

Susan Jones has a job as a pharmacist earning $45,000 per year, and she is deciding whether to take another job as the manager of another pharmacy for $55,000 per year or to purchase a pharmacy that generates revenue of $350,000 per year. To purchase the pharmacy, Susan would have to use her $20,000 savings and borrow another $90,000 at an interest rate of 8% per year. The pharmacy that Susan is contemplating purchasing has additional expenses of $100,000 for prescription and non-prescription drugs and lines of women’s and men’s personal hygiene products and cosmetics; $45,000 for one full time person; $20,000 for one part time person; $12,000 for rent; $2,500 for electricity; $1,300 for natural gas; $1,200 for telecommunications; and depreciation and amortization expenses are $5,500. Assume that income and business taxes are 35% and the repayment of the principal of the loan does not start before three years. Also assume that revenue is expected to grow at 5% per year and expenses at…

An increase in land rents   a. will lead to an increase in the marginal revenue product of all inputs used in production except for the land.   b. will lead to an increase in the marginal revenue product of all inputs used in production on the land.   c. will lead to land to be used less intensively as its marginal revenue product has decreased.   d. will bring some previously zero-rent land into productive use.