Scenario 14-4 Victor Is the Recipient of $1 Million from a Lawsuit

question 1

Multiple Choice

Scenario 14-4
Victor is the recipient of $1 million from a lawsuit. Victor decides to use the money to purchase a small business in Florida. His business operates in a perfectly competitive industry. If Victor would have invested the $1 million in a risk-free bond fund, he could have earned $100,000 each year. After he bought the small business, Victor quit his job as a market analyst with Research, Inc., where he used to earn $75,000 per year.
-Refer to Scenario 14-4. At the end of the first year of operating his new business, Victor's accountant reported an accounting profit of $150,000. What was Victor's economic profit?

• A)-$150,000
• B)-$50,000
• C)-$25,000
• D)$25,000

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Definitions:

Distrust

The feeling of skepticism or doubt towards someone or something's reliability or truthfulness.

Halo Effect

A cognitive bias where an impression created in one area influences opinion in another area.

Attractive

Qualities or features that are pleasing or appealing to the senses, especially aesthetically or in terms of personality.

Kind

Characterized by a caring, generous, and considerate nature towards others.