E202Exam2.7 - 9. You have an opportunity to buy an apple...

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8. Workers in a poor cotton-growing region choose between working in a factory at $6,000 a year or being a tenant cotton farmer. One farmer can work a 120 acre farm that rents for $10,000 a year. Such a farm yields $20,000 worth of cotton each year. The total nonlabor cost of producing the cotton is $4,000 a year. The local government decides to provide free fertilizer that would triple cotton yields. a. If the price of cotton is unaffected, how would this program affect the income of tenant farmers in the short run? In the long run? b. Who would benefit from the program in the long run? How much would they gain each year?
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Unformatted text preview: 9. You have an opportunity to buy an apple orchard that produces $25,000 per year in total revenue. To run the orchard, you would have to give up your current job, which pays $10,000 per year. If you find both jobs equally satisfying, and the annual interest rate is 10 percent, what is the highest price you would be willing to pay for the orchard? On my honor as an Aggie, I have neither given nor received unauthorized aid on this exam. Signature _____________________...
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This note was uploaded on 02/20/2012 for the course ECON 202 taught by Professor Brightwell during the Spring '08 term at Texas A&M.

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