Environmental Economic: A reclusive billionaire owns five Picasso paintings whic

Question

Environmental Economic: A reclusive billionaire owns five Picasso paintings which he keeps stored in a vault because of his fear that it might be stolen. His nephew urges him to sell the paintings. However, possibly to spite the nephew, he decides not to sell the Picassos and to leave them in storage for one more year.
a. What economic return does he earn by this decision?
b. Would your answer be any different if, instead of keeping the paintings in a vault, he hung them in the living room of his apartment in the Trump Tower?
*The billionaire also owns 250 acres of oil fields in Wyoming. The same nephew urges him to sell that acreage. Instead he decides to keep owning Wyoming acreage for one more year.
c. What economic return does he earn by this decision? *
*The billionaire also owns a herd of 4,000 bison in Montana. The nephew urges him to sell the herd of bison. Instead he decides to keep owning the bison for one more year.
d. What economic return does he earn by this decision?
*The next year, he does listen to his nephew and he agrees that he could reallocate some of holdings, increasing or decreasing the amount of each type of asset that he owns.
e. What economic rule should he follow in rebalancing his portfolio of assets?

Explanation / Answer

A. No economic return he earns by his decision as he is not selling them or doing any grade with it. He is keeping them uselessly.

B. NO

C. The oil extracted from his field would be sold in market and would come in use in many ways.

D. Ecosystem balance, by owning animal and taking care of them. Also it's meat could be sold to pet food company.

E. The things generating more profit must not be sold and things generating least, or no profit must be sold.

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