Lawrence Earns $X in His Current Job

question 132

Multiple Choice

Lawrence earns $X in his current job. If he weren't working at his current job, he would be working at another job earning $Y. It follows that

• A)Lawrence is not earning any economic rent in his current job.
• B)Lawrence is earning economic rent in his current job if $X - $Y is a positive dollar amount.
• C)Lawrence is earning economic rent in his current job if $X - $Y is a negative dollar amount.
• D)Lawrence is earning pure economic rent in his current job.
• E)Lawrence is definitely earning some economic rent in his current job.

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Definitions:

Discounted Payback Period

A capital budgeting method that calculates the amount of time needed to break even from an investment in present value terms, factoring in the time value of money.

Discount Rate

In discounted cash flow analysis, it's the rate of interest used for calculating the present day value of future financial inflows.

Cash Flows

The sum of all money transactions both incoming and outgoing in an establishment, affecting its ability to maintain liquid resources.

Discounted Payback Period

The time required to recoup the cost of an investment taking the time value of money into account, effectively the period it takes for an investment's cash flows to cover its initial cost.