-Lucy Works as a College Instructor for a Fixed Annual

question 23

Multiple Choice

-Lucy works as a college instructor for a fixed annual salary of $30,000. She is considering quitting this job and becoming a real estate broker. Lucy believes that as a realtor she has a 40 percent chance to make $60,000 per year and a 60 percent chance to make $25,000 a year. The figure above shows Lucy's total utility of wealth curve (U) . Of the following, what minimum salary raise (if any) should Lucy's current employer offer her to persuade her to stay?

• A) No raise is necessary as Lucy is better off with her current salary than with her expected income as a realtor.
• B) $8,000
• C) $5,000
• D) $3,000

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Definitions:

Graduate Assistantship

A form of financial aid provided to graduate students through part-time teaching or research duties, often including tuition remission and a stipend.

Tax Return

A document filed with a tax authority that reports income, expenses, and other pertinent tax information. Taxes are paid or refunds are requested via a tax return.

Scholarship

Financial support awarded to a student, based on academic achievement or other criteria, which does not need to be repaid.

Educational Institution

This is any place of learning, such as a school, college, university, or technical institute, accredited to deliver education or training.