Suppose the local market for legal services has an upward sloping supply curve, P_L = 150 + 0.0001Q_L where P_L is the price of legal services and Q_L is the number of hours of legal services. If the equilibrium price of legal services is $250 per hour, what is the aggregate economic rent earned by lawyers in this market? A) $50,000 B) $1,000,000 C) $50,000,000 D) $100,000,000

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Quizplus · Accepted Answer

To find the aggregate economic rent, we need to calculate the area of the triangle formed by the equilibrium price and quantity (represented by the supply curve) and the point where the supply curve intersects the vertical axis (representing the minimum price required for lawyers to provide their services). To do this, we first need to solve for the quantity of legal services at the equilibrium price: $250 = 150 + 0.0001Q Q = 1,000,000 Next, we can plug this quantity into the supply curve to find the minimum price required for lawyers to provide their services: P_L = 150 + 0.0001(1,000,000) P_L = $250 Now we have the two points we need to calculate the area of the triangle: Base = $250 - $150 = $100 Height = 1,000,000 hours Area = 1/2 x Base x Height Area = 1/2 x $100 x 1,000,000 Area = $50,000,000 Therefore, the aggregate economic rent earned by lawyers in this market is $50,000,000.

Suppose the Local Market for Legal Services Has an Upward