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:

CCA Class

Canadian Capital Cost Allowance Class; a categorization in Canadian tax law that determines the depreciation rate for tax purposes on different types of assets.

Required Rate

The lowest expected gain an investor aims to receive from an investment in a specific asset, taking into account the associated risk.

Fixed Costs

Expenses that do not change with the volume of production or sales, such as rent, salaries, and insurance premiums.

Bottom-Up Approach

A strategy that starts at the very detailed level and works upwards to form a complete picture, often used in analysis or planning.