Learn Before
Economic Rent Formula
Comparing Concert Net Benefit to Opportunity Cost
Calculating Economic Rent from a Concert Decision
Economic rent measures the surplus gain from selecting the best option over the next best alternative. It is calculated by subtracting the opportunity cost from the net benefit of the chosen action. For instance, in the concert scenario where the net benefit of attending is $30 and the opportunity cost from babysitting is $22, the economic rent is the difference between these two values. Therefore, the economic rent from choosing to go to the concert is $8 ($30 - $22).
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CORE Econ
Economics
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.2 Technology and incentives - The Economy 2.0 Microeconomics @ CORE Econ
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Calculating Economic Rent from a Job Offer
You have a ticket to a concert that you paid $45 for. The enjoyment you get from the concert is worth $100 to you. Your only other option for the evening is to attend a free festival in the park, which you value at $30. What is the economic rent you receive from attending the concert?
Analyzing Components of Economic Rent
A software developer leaves a job that provided a net benefit of $90,000 per year to start their own company. In the first year, the new company generates a net benefit of $110,000. The developer's economic rent from starting the company is therefore $110,000.
Match each scenario to its correct economic rent.
An artist is deciding between two commissions. Commission A offers a payment of $500 but will require $50 in materials. Commission B offers a payment of $400 and will require $20 in materials. The artist chooses Commission A. The economic rent from choosing Commission A is $____.
A student is calculating the economic rent of choosing to attend a specific university program. They determine the net benefit of the program to be $500,000 over their lifetime. Their next best alternative, working a full-time job, has a net benefit of $120,000. Before making this decision, the student had already paid $1,000 in various non-refundable application fees. The student calculates their economic rent as: $500,000 - $120,000 - $1,000 = $379,000. Which of the following statements best evaluates the student's calculation?
An individual chooses to work as a freelance designer, which they calculate gives them an economic rent of $200 per week compared to their next best alternative of working in a retail store. The net benefit of working in retail is $450 per week. Suppose a new local policy increases the minimum wage, which raises the net benefit of the retail job to $500 per week. If the net benefit from freelance design remains the same, what is the individual's new economic rent from freelance design?
Maximizing Economic Rent in a Career Choice
Analyzing an Investment Decision
Calculating Economic Rent from a Concert Decision
Calculating Employment Rent
Calculating Economic Rent from a Concert Decision
An individual is deciding between two weekend activities. They could attend a workshop they value at $200, which has a registration fee of $50. Their only other alternative is to work a freelance project, which would pay them $180 but incur $40 in software subscription costs for the weekend. To make a rational choice, they must compare the net benefit of attending the workshop to its opportunity cost. What should they do and why?
Decision-Making: Summer Activity Choice
Weekend Job Decision
A student is deciding how to spend their Friday night. They could go to a movie, which they value at $40; the ticket costs $15. Their only other alternative is to work a tutoring session, which would earn them $30. The student decides to go to the movie because the enjoyment they get ($40) is greater than the money they would have earned from tutoring ($30). According to the principle of comparing an action's net benefit to its opportunity cost, the student's reasoning for their decision is correct.
You are deciding whether to attend a coding workshop. The workshop ticket costs $75, but you value the skills you'll gain at $200. Your only other option for that time is to take a freelance gig that would pay you $110. Arrange the following steps in the correct logical order to make a rational economic decision based on these figures.
An individual is deciding whether to take a weekend trip. They value the experience of the trip at $500, but it will cost $200 in travel and lodging. Their only other alternative for the weekend is to work a part-time job, which would provide a net income of $220. To make a rational choice, the individual must compare the net benefit of the trip to its opportunity cost. The net benefit of taking the trip is $____.
An individual is deciding how to spend their evening. They could attend a local theater performance, which they value at $60. The ticket for the performance costs $20. Their only other alternative is to work a short shift at their job, where they would earn $45. Based on this scenario, match each economic concept to its correct calculated value.
Evaluating a Weekend Decision
Learn After
Evaluating a Consumer's Trade-Off Decision
Alex has a free evening and is deciding between two options. Option A is to go to a movie, which Alex values at $50. The movie ticket costs $15. Option B is to work an extra shift, which would pay $40, but would require $10 for transportation. If Alex chooses to go to the movie, what is the surplus gain from this decision compared to the next best alternative?
Calculating Surplus from a Career Development Choice
Jamie is deciding how to spend their Saturday afternoon. They could go to a street festival, which they value at $90. Getting there and buying food will cost $20. Alternatively, they could take a freelance graphic design gig that pays $75, but they would need to spend $15 on a special software subscription for the project. Jamie chooses to go to the festival. The surplus gain, or economic rent, from choosing the festival over the gig is $15.
Jamie is deciding how to spend their Saturday afternoon. They could go to a street festival, which they value at $90. Getting there and buying food will cost $20. Alternatively, they could take a freelance graphic design gig that pays $75, but they would need to spend $15 on a special software subscription for the project. Jamie chooses to go to the festival. The surplus gain, or economic rent, from choosing the festival over the gig is $15.
Sarah chose to attend a coding workshop instead of working on a freelance design project. The freelance project would have provided a net benefit of $150. Sarah valued the workshop at $250. After her decision, she calculated that the surplus gain from choosing the workshop was $40. What was the cost of the workshop ticket?
An individual is faced with several decisions, each with a chosen action and a next best alternative. Match each scenario with the correct economic rent (the surplus gain) generated by the chosen action.
Constructing a Scenario to Illustrate Economic Rent