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14 May, 22:20

Kurt is a professional golfer, who use to work as an engineer. Aside from the money he enjoys both jobs equally. He earned $80,000 as an engineer but now earns $400,000 as a golfer. As a professional golfer with $400,000 in total earnings how much was economic rent and how much was opportunity cost? Explain your answer

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  1. 14 May, 22:57
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    Answer:Economic rent-$320,000

    Opportunity Cost-80,000

    Explanation:

    Economic rent is the extra amount or addition earned by a production resource here and in this context, Mr Kurt is the resource. In this scenario, the extra amount he earned as a professional golfer having quit engineering for it and thus had a step-up (addition) of $320,000.

    While the opportunity cost which known as the alternative forgone in order in favour of another alternative in a decision process here is $80,000. In this case, he had to forego engineering job ($80,000) and therefore concentrate on professional golfing which paid him more (400,000) not omitting the fact that he could have engaged in the two jobs at same time.
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