Suppose that Robert is willing to work for $10 per hour and receives an offer of $15 per hour.Robert's
A) economic profit is $5 per hour.
B) economic rent is $5 per hour.
C) economic rent is $15 per hour.
D) economic profit is $15 per hour.
E) economic rent is $10 per hour.

Question

Quizplus · Accepted Answer

Economic rent is the difference between the amount earned and the minimum amount necessary to keep a resource (in this case, Robert) in its current use. In this case, the minimum amount necessary to keep Robert working is $10 per hour (his reservation wage). Therefore, the economic rent is $15-$10=$5 per hour. Economic profit includes both economic rent and explicit costs, such as taxes or expenses related to the job, which are not given in the question. Therefore, we cannot determine economic profit.

Suppose That Robert Is Willing to Work for $10 Per