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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 7E
Textbook Problem
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Using exercise 6, calculate the transfer earnings and economic rent of the third unit of the resource when four units of the resource are employed. Do the same calculations when only three units of the resource are employed. How do you account for the different answers?

To determine

To find:

The transfer earnings and the economic rent.

Explanation of Solution

Resource price for 3 units is $14. This is exactly the amount to pay to get the resource to "transfer" to another use.So, transfer earning of third unit of the resource is $14.

Economic rent is a payment given to factor resource above transfer earning. This is an incentive given to keep the resource in the current firm.

As 4 units of resource are employed, each at price of $18 per unit; so, the portio...

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