Question

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.

Answer 1

Economic rent is the extra income earned by putting your efforts. Initially income was $80000. New income as a golfer is 400000. Thus economic rent is 400000 - 80000 = 320000

Opportunity cost is the amount of money left for the next best alternative use. To earn the income of golfer, Kurt had to leave there income as engineer, thus opportunity cost is 80000.