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:

Cafeteria Plan

A type of employee benefit plan that allows workers to choose from a variety of pre-tax benefit options to design a benefits package that best meets their needs.

Benefits Plan

A range of employee benefits offered by employers, including health insurance, retirement plans, and paid time off.

Health Insurance

A type of insurance coverage that pays for medical and surgical expenses incurred by the insured.

Dental Plans

Insurance coverage plans that help pay for the costs of dental care.