This preview shows page 1. Sign up to view the full content.
Unformatted text preview: 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? Answer : Owning the orchard is owning a stream of $25,000 - $10,000 = $15,000 each year, net of the opportunity cost of your time. The highest you would be willing to pay for the orchard is the value that yields zero economic profit, the value which, invested in a bank at 10 percent interest, would also yield $15,000 a year. Since $150,000 (0.10) = $15,000, that amount is $150,000....
View Full Document
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.
- Spring '08