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The City of New York has 200 advertising companies, 199 of which employ designers of normal ability at a salary of $100,000 a year. Paying this salary, each of the 199 firms makes a normal profit on $500,000 in revenue. However, thee 200th company employs John Smith, an unusually talented designer. This company collects $1,000,000 in revenues because of Smith's talent. A. How much will Smith earn? What promotion of his annual salary will be economic rent? B. Why won't the advertising company for which Smith works be able to earn an economic profit?

Econometrics, Economics

  • Category:- Econometrics
  • Reference No.:- M9686594

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