Donald owns and manages a 30-floor office building in a thriving downtown location. In the current year, this building is making an accounting profit for Donald: That is, the explicit costs of maintaining the building (utilities, taxes, janitorial staff, etc.) are less than the revenue Donald collects from the business tenants.
At the end of this same year, Donald decides to sell the building and invest the money in a bank. Assume that Donald is a rational economic decision maker who cares primarily about the amount of income he can earn. Which of the following could explain his behavior?
A. He finds out that the interest he can earn by depositing his money in a bank is much higher than it was previously.
B. Neither of these reasons explains his behavior.
C. He discovers he paid 10% more than the market price for the building when he bought it 10 years ago, but has no way to recover his overpayment.
At the end of this same year, Donald decides to sell the building and invest the money in a bank. Assume that Donald is a rational economic decision maker who cares primarily about the amount of income he can earn. Which of the following could explain his behavior?
A. He finds out that the interest he can earn by depositing his money in a bank is much higher than it was previously.
B. Neither of these reasons explains his behavior.
C. He discovers he paid 10% more than the market price for the building when he bought it 10 years ago, but has no way to recover his overpayment.