Question

Bill Brown commands $2 million a year as either a professional basketball player or a professional baseball player. His next best alternative is a coaching job at a high school that pays $60,000 a year. if bill chooses to play professional basketball, then his economic rent from working at that job rather than working as a professional baseball player is____

o $0.$60,000
o $1 million
o $1,930,000
o $2 million.

Answer 1

Bill Brown's economic rent from playing professional basketball over baseball is $0, as both sports command the same $2 million salary. The economic rent calculation compares the chosen job's salary to the next best alternative's pay.

Step-by-step explanation:

The direct answer to the question of Bill Brown's economic rent from playing professional basketball instead of baseball is $0.

Economic rent refers to the excess compensation a person receives over what they would get in their next best alternative job. In Bill's case, both basketball and baseball pay the same amount of $2 million per year. Therefore, there is no economic rent from choosing one over the other as the compensation does not exceed what Bill could earn from the other sport. His economic rent compared to the high school coaching job, which is his next best alternative at $60,000, would be $1,940,000 (which is $2 million minus $60,000). In the context of professional sports, salaries can vary greatly based on the level of stardom and demand for the player's talent, sometimes regardless of educational differences, which can contribute to these high figures of economic rent for the top earners.

The economic rent from working as a professional basketball player rather than as a professional baseball player for Bill Brown would be $0. Since Bill commands $2 million a year in both sports, there would be no difference in his economic rent if he chooses basketball.