A Vintner Is Deciding When to Release a Vintage of Sauvignon

question 61

Multiple Choice

A vintner is deciding when to release a vintage of sauvignon blanc.If it is bottled and released now,the wine will be worth $2.2 million.If it is barrel aged for a further year,it will be worth 20% more,though there will be additional costs of $500,000.If the interest rate is 7%,what is the difference in the benefit the vintner will realize if he releases the wine after barrel aging it for one year or if he releases the wine now?

• A)He will earn $600,000 less if he releases the wine now.
• B)He will earn $60,000 less if he releases the wine now.
• C)He will earn $107,000 less if he releases the wine now.
• D)He will earn $80,000 more if he releases the wine now.

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Definitions:

Monopolist

A market participant that is the sole seller of a good or service, with significant control over its price.

Output Increase

Refers to a rise in the quantity of goods or services produced by an individual, company, or economy over a given period.

Economies of Scale

The decrease in unit cost that results from enhanced scale of operations, highlighting how companies can save on costs per unit by expanding their production scope.

Inelastic Portion

A segment of the demand curve where consumers are relatively unresponsive to changes in price, meaning demand does not significantly decrease as the price increases.