Markets for natural resources are distinguished according to whether the resources are exhaustible or renewable Owners of natural resources have an incentive to consider future as well as present demands for these resources Land, when it has a vertical supply curve, generates a return that consists entirely of rent In general, economic rent is return to a resource in excess of the minimum price necessary to make that resource available CONCEPT PROBLEMS The charging of interest rates is often viewed with contempt Do interest rates serve any useful purpose? How does an increase in interest rates affect the present value of a future payment? How does an increase in the size of a future payment affect the present value of the future payment? Two payments of $1,000 are to be made One of them will be paid one year from today and the other will be paid two years from today Which has the greater present value? Why? The essay on the viatical settlements industry suggests that investors pay only 80% of the face value of a life insurance policy that is expected to be paid off in six months Why? Would it not be fairer if investors paid the full value? How would each of the following events affect the demand curve for capital? A prospective cut in taxes imposed on business firms A reduction in the price of labor An improvement in technology that increases capital’s marginal product Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 727