Is it possible to college professor to receive economic rent

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1. Is it possible for a college professor to receive economic rent? If so, how would the amount of economic be measured? Note that economic rent in the labor market is sometimes referred to as quasi-rent in order to distinguish it from the return that is generated by the factor of production that is known as land.

2. Suppose you loan $5,000 to a friend to help him start a new restaurant business. Your friend signs a promissory note at a simple fixed interest rate of 5% per annum. This note requires repayment in one lump sum five years from the date of the loan. One year after making this loan, you notice that interest rates throughout the economy are lower than they were when you made the loan. Explain why you become richer as interest rates throughout the economy fall.

3. Assume you have a contract right to collect $1,000 in one lump sum five years from now. The simple interest rate is 6%. What is the present value of your contract right to collect this amount? Refer to the present value table in the notes.

4. Suppose you have $1,000 in hand right now. Assuming a simple interest rate of 3%, what will be the value of this money eight years from now? Hint: You can use the present value table in the notes if you divide instead of multiply.

5. Can you provide your own example of a company that receives economic profit? Provide a brief explanation.

Reference no: EM13213723

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