In 2012, Khalid Was in an Automobile Accident and Suffered

question 99

Multiple Choice

In 2012, Khalid was in an automobile accident and suffered physical injuries.The accident was caused by Rashad's negligence.Khalid threatened to file a lawsuit against Amber Trucking Company, Rashad's employer, claiming $50,000 for pain and suffering, $25,000 for loss of income, and $100,000 in punitive damages.Amber's insurance company will not pay punitive damages; therefore, Amber has offered to settle the case for $120,000 for pain and suffering, $25,000 for loss of income, and nothing for punitive damages. Khalid is in the 35% marginal tax bracket.What is the after-tax difference to Khalid between Khalid's original claim and Amber's offer?

• A)Amber's offer is $30,000 less.(- $100,000 punitive damages + $70,000 increased pain and suffering.)
• B)Amber's offer is $10,500 less.[($30,000 ´ .35) = $10,500].
• C)Amber's offer is $19,500 less. [$30,000(1 - .35) = $19,500].
• D)Amber's offer is $5,000 more.[$70,000 - (1 - .35)($100,000) = $65,000].
• E)None of the above.

Recognize and provide examples of the four different market structures.

Understand the defining characteristics of pure competition.

Evaluate the types of products produced in different market structures and their levels of similarity or differentiation.

Apply the total revenue and total cost method to determine optimal output levels for firms in purely competitive markets.

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Definitions:

Variable Costs

Costs that change in proportion to the level of goods or services produced by a business.

EPS

Earnings Per Share, a financial metric that divides a company's profit by the number of its outstanding shares to indicate the company's profitability on a per-share basis.

Capital

Financial resources or assets owned by a business or individual that are useful in furthering development and generating income.

Debt

An amount of money borrowed by one party from another, under the condition of repayment with interest.