564 Miller Economics Today, Nineteenth Edition
Chapter 21 Rents, Profits, and the Financial Environment of Business
Do Entertainment Superstars Make Super Economic Rents?
Superstars do very well financially. For example, actress Reese Witherspoon currently makes $28 million
a year. How much of these earnings can be considered economic rent? Undoubtedly, Ms. Witherspoon
would work for much less if less was that all she was offered. How much less is hard to determine, however,
Rents in Hong Kong
In the early 2000s, the Hong Kong real estate market was suffering from overbuilding of office space about
the same time as the Asian financial crisis when there were huge outflows of funds from most Asian
countries that brought near-depression conditions in the region. As a consequence, many companies
failed, and some foreign companies left the region. The upshot was that there was a large amount of
empty office space in Hong Kong.
In 2003, the market bottomed out, and the economies of Hong Kong and other countries in the region
began to recover. The central business district in Hong Kong became a very desirable location for offices
for global financial services companies, such as banks and hedge funds, among others. In fact, the central
Funding a Start-Up Company on the Internet
Getting a business off the ground requires more than a lot of hard work. It requires raising hard cash.
Many small businesses have trouble raising seed money to get started, but those that succeed in raising
Lecture Extender Examples 565
initial funds can seek out venture capital firms for additional financing. Eventually, they can go public by
floating a stock issue. Today, a business can go public on the Internet it can sell shares to the public
directly. Spring Street brewing company made history back in 1995 when it became the first company to
Two Firms Find Different Uses for Big Loads of Cash
Dell and Microsoft are
electronic commerce. Both companies generated annual inflows of funds in the billions of dollars. Dell
U.S. taxpayers pay each member of the natio -volunteer military a package of salary and benefits equal
to about $99,000 per year. About $42,500 of this is direct pay. Approximately $38,000 of the remaining
$56,500 consists of health care and pension benefits that a person in the military will not get until
completing at least 20 years of service. Studies of choices that officers and enlisted personnel have made