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Economics:

10th Edition
BOYES + 1 other
Publisher: Cengage Learning
ISBN: 9781285859460

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BuyFindarrow_forward

Economics:

10th Edition
BOYES + 1 other
Publisher: Cengage Learning
ISBN: 9781285859460
Chapter 29, Problem 10E
Textbook Problem
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Supposedly Larry Bird once said that he would play basketball for $10,000 per year. Yet he was paid over $1 million per year. If the quote is correct, how much were Bird’s transfer earnings? How much was his economic rent?

To determine

To find:

The transfer earnings and the economic rent.

Explanation of Solution

LB would play for $10,000 per year. This means LB would not play for less than $10,000 per year. So, to keep LB playing, $10,000 per year is the minimum amount to be paid. Thus, $10,000 is a transfer earning.

In actual,LB is paid $1 million per year. So, this is the extra amount paid above transfer earning. The amounts which is paid above transfer earning is called economic amount...

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