e interest rate is 0.20. H Tack ill D 150 100 100 75 had to stay together, where would they cho
e interest rate is 0.20. H Tack ill D 150 100 100 75 had to stay together, where would they cho
Chapter1: Federal Income Taxation—an Overview
Section: Chapter Questions
Problem 60P: Michiko and Saul are planning to attend the same university next year. The university estimates...
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Transcribed Image Text:(Family) Migration: Assume that each person has three periods to live. At the beginning of the
first period, they need to decide whether to stay at their home location (H) or move to a distant
location (D). Table below shows Jack and Jill's per-period earning at each location. The cost of
moving is 100 per person. The interest rate is 0.20.
H
D
Jack
100
150
Jill
75
100
a. Suppose that the couple had to stay together, where would they choose to be? What is their
total net lifetime earnings (total earnings minus total costs)? Identify the tied-mover or tied-
stayer?
b. Suppose they could stay apart, but Jack has to travel to visit Jill once per period. The cost of
such visit is 10 per trip. Where would each of them choose to be? What is their total net
lifetime earnings (earnings minus costs)?
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