Question: A baseball team has signed a draft pick to a two year contract. The player's expectedmarginal revenue product in year 1 and year 2 are

A baseball team has signed a draft pick to a two year contract. The player's expectedmarginal 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 rateis 7% each year. The competitive wage in year 2 is expected to be $1.8-million. lf theteam is indifferent about the player resigning with it at the end of his contract, howmuch will they pay him in the second year?

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