CAS EC 101 Chapter Notes - Chapter 17: Cristiano Ronaldo, Reservation Price, Economic Rent

• School: Boston University
• Department: Economics
• Course: CAS EC 101
• Professor: Michael Manove

Document Summary

Economic rent: when a person (or firm) provides an input for production. Do not confuse rentals (cars, apartments) with economic rents. Where do economic rents come from: economic rents arise from scarce resources owned or controlled by some individuals or firms. Market power (ability to raise prices without losing all of your customers; few sellers in a particular product; monopolies: sometimes rent-creating inputs are naturally scarce because it would be costly or impossible to produce more. Economic rents and opportunity cost: the reservation price of an input is the minimum amount its owner would be willing to accept for it. Example: bu students: bu students are far more intelligent than average, on average, after you graduate, you will earn more money than more other people. Example: salary cap: suppose fifa had decided that since all soccer players have a reservation price less than ,000, they would limit the salary of all soccer players to.