Intermediate Microeconomics · free preview
Rents, Asset Prices, and Factor Markets
The rent logic prices every scarce durable asset at the present value of its service flows, land, licenses, machines, and skills, rental rates and asset prices linked by the interest rate, and the factor markets for labor and capital read like the goods markets with the horizons switched.
1. Rental rates and asset prices
Rental rates and asset prices
2. Factor demand
Factor demand
3. Economic rent in factor markets
Economic rent in factor markets
4. The module's system view
The module's system view
5. The arbitrage pin
What pins an asset's price to the present value of its rents?
6. Rate fall, price move
Interest falls from 5 to 4 percent. What happens to the license price at rent 10 thousand?
7. Factor demand's shape
What is the demand curve for a factor in a competitive industry?
8. Rent versus retention
What distinguishes a factor's rent from its retention payment?
9. Price at the lower rate
Compute 10000 divided by 0.04, and write the number.
10. Two parts of a wage
A surgeon earns 400 thousand, her next-best career pays 150 thousand. Compute the rent portion, and write the number in thousands.
11. A steeper rate
The license earns 10 thousand a year. What is it worth if interest rates run 6 percent?
12. The retention payment
The surgeon earns 400 thousand, her next-best career pays 150 thousand. What is her retention payment?
13. The asset's windfall
Interest falls from 5 to 4 percent on the license earning 10 thousand yearly. How much does the owner's wealth change?
14. The factor's marginal value
A worker's marginal product is 5 units, output sells at 10, the wage is 40. What does competitive hiring imply?
15. License at six percent
A license earning 10 thousand a year with interest at 6 percent, compute its price, and write the number rounded to the nearest whole unit.
16. The value of marginal product
A factor's marginal product is 5 units and output sells at 10 per unit. Compute VMP, and write the number.
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