A baseball team has signed a draft pick to a two year contract. The player's expected marginal revenue product in year 1 and year 2 are $1-million and $1.7-million respectively. The contracted wage is $1.3-million in the first year. The interest rate is 7% each year. The competitive wage in year 2 is expected to be $1.8-million. If the team is indifferent about the player resigning with it at the end of his contract, how much will they pay him in the second year? Use a$ and commas.
A baseball team has signed a draft pick to a two year contract. The player's expected marginal revenue product in year 1 and year 2 are $1-million and $1.7-million respectively. The contracted wage is $1.3-million in the first year. The interest rate is 7% each year. The competitive wage in year 2 is expected to be $1.8-million. If the team is indifferent about the player resigning with it at the end of his contract, how much will they pay him in the second year? Use a$ and commas.
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter20: The Problem Of Adverse Selection Moral Hazard
Section: Chapter Questions
Problem 3MC
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A baseball team has signed a draft pick to a two year contract. The player's expected
marginal revenue product in year 1 and year 2 are $1-million and $1.7-million
respectively. The contracted wage is $1.3-million in the first year. The interest rate is
7% each year. The competitive wage in year 2 is expected to be $1.8-million. If the
team is indifferent about the player resigning with it at the end of his contract, how
much will they pay him in the second year? Use a$ and commas.
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