Question: 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
A baseball team has signed a draft pick to a two year contract. The player's expected marginal revenue product in year and year are $million and $million respectively. The contracted wage is $million in the first year. The interest rate is each year. The competitive wage in year is expected to be $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?
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