LeBron James, a prominent basketball player, is considering signing on for another two years with his current team. The team managers, however, face a salary cap of $90 million for their team and have already contracted players for a total of $75 million. James, used to earning $20 million a year, has been offered to play for $15 million this year and $27 million in his second year. The current interest rate is 6.5%. Should he agree to the contract?
What will be an ideal response?
Yes, James should agree to the contact. To compensate for the $5 million reduction in his salary, James would need to earn at least $26.07 million in his second year [$20 million + ($5 million ? 1.065)] to maintain his usual $20 million a year.
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A private cost is a cost of production that is borne by the
A) consumer of the good. B) producer of the good. C) government. D) consumer of the good and the government.
In what way is the result of an excise tax imposed on either demanders or suppliers similar to the result of a price floor?
a. The amount that consumers pay for the good will be less than they previously paid b. The amount of the good that will be traded in the market will be greater than previously traded c. both price floors and excise taxes create excess demand d. The amount that consumers pay for the good will be greater than they previously paid e. Both price floors and excise taxes create excess supply
Assume that Michael is interested in buying a lawn mower. Right now, interest rates are very high, but he believes they will soon start to fall. If Michael purchases the lawn mower today, we know that
a. he was concerned about future inflation. b. the current inflation rate was low. c. he paid an inflationary premium. d. he had a strong, positive rate of time preference.
Which of the following most accurately states the economic significance of voluntary exchange?
a. Goods and services have value because they exist; exchange causes some people to win while others lose. b. Exchange creates value because it makes it possible for the trading partners to expand total output as the result of specialization and division of labor. c. Exchange moves goods and services from people who value them more to parties who value the goods less. d. Exchange cannot create additional value because it does not create additional goods and services.