E202ProblemSet6.3

E202ProblemSet6.3 - whose sale generates $30,000 a year...

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6. The government of a developing country has decided to limit imports of machine tools, to encourage the development of locally made machine tools. To do so, the government offers to sell a small number of machine-tool import licences. To operate a machine-tool import business costs $30,000, excluding the cost of the import license. An importer of machine tools can expect to earn $50,000 per year. If the annual interest rate is 10 percent, how much will the government be able to auction the import licenses? Will the owner of a license earn an economic profit? 8. You have a friend who is a potter. He holds a permanent patent on an indestructible teacup
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Unformatted text preview: whose sale generates $30,000 a year more revenue than production costs. If the annual interest rate is 20 percent, what is the market value of this patent? 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 assignment. Signature _____________________...
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