Pat Has Just Graduated from College and Has Two Job

question 30

Multiple Choice

Pat has just graduated from college and has two job offers. One pays $45,000 and requires that Pat supervise employees doing construction work on a busy highway. The other is an office job that pays $40,000. Chris has received the same offers from the same firms. Pat values the added safety of the office job at $6,000 per year, and Chris values the added safety of the office job at $3,000 per year. Suppose that the agency that regulates highway safety requires that the highway construction firm provide additional safety precautions. After the changes, Chris places no additional value on working at the office, and Pat values the added safety of the office job by $2,000 per year. If the safety precautions cost the firm $3,000 per year and the highway construction firm reduces salaries by $3,000 to $42,000, then:

• A)Pat will prefer the office job, and Chris will be indifferent between the two jobs.
• B)both will prefer the highway job.
• C)both will prefer the office job.
• D)Chris will prefer the highway job, and Pat will be indifferent between the two jobs.

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Definitions:

Paid-in Capital

Funds received from investors during equity issuances, contributing to a company's equity beyond the initial stock value.

Cash Price

The amount of money that a buyer pays to purchase a good or service when paying in cash instead of using credit or financing.

Book Value

The net value of a company's assets minus its liabilities, often used to assess the company's underlying value.

Common Share

Equity securities that represent ownership in a corporation, providing voting rights and a share in the company's profits via dividends.