Authors libby rittenberg 728

4. An increase in interest rates
7. If developed and made practical, fusion technology would allow the
production of virtually unlimited quantities of cheap, pollution-free
energy. Some scientists predict that the technology for fusion will be
developed within the next few decades. How does an expectation that
fusion will be developed affect the market for oil today?
8. Is the rent paid for an apartment economic rent? Explain.
9. Film director Brett Ratner (Rush Hour, After the Sunset, and others)
commented to a New York Times (November 13, 2004, p. A19)
reporter that, “If he weren’t a director, Mr. Ratner said he would
surely be taking orders at McDonald’s.” How much economic rent is
Mr. Ratner likely earning?
10. Suppose you own a ranch, and that commercial and residential
development start to take place around your ranch. How will this
affect the value of your property? What will happen to the quantity of
land? What kind of return will you earn?
11. Explain why higher interest rates tend to increase the current use of
natural resources.

NUMERICAL PROBLEMS
Use the tables below to answer Problems 1–5. The first table gives the
present value of $1 at the end of different time periods, given
different interest rates. For example, at an interest rate of 10%, the
present value of $1 to be paid in 20 years is $0.149. At 10% interest,
the present value of $1,000 to be paid in 20 years equals $1,000 times
0.149, or $149. The second table gives the present value of a stream
of payments of $1 to be made at the end of each period for a given
number of periods. For example, at 10% interest, the present value of
Attributed to Libby Rittenberg and Timothy Tregarthen
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