11. Suppose that lowering the drinking age is accompanied with a strict limit on liquor licenses in Madison Park so that no more liquor licenses can be had in the Madison Park area. However, if a bar owners chooses to go out of business she may sell her license. Suppose the typical bar owner could earn $35,000 annually in her next best job but earns $55,000 as a bar owner after the drinking age change. If typical investments pays 10%, roughly what would a liquor license sell for?
- $2 million.
- $5.5 million.
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