Economics 13th Edition by James Gwartney, Richard Stroup, Russell Sobel, David Macpherson

Exercise 9

Suppose that a group of investors wants to start a business operated out of a popular Utah ski area. The group is considering either building a new hotel complex or starting a new local airline serving that market. Each new business would require about the same amount of capital and personnel hiring. The group believes each endeavor has the same profit potential. Which is the safer (less likely to result in a substantial capital loss) investment? Why? Is there an offsetting advantage to the other investment?