Doug Is Currently Not Employed

question 255

Multiple Choice

Doug is currently not employed. He places a value of $16 an hour on his time in nonmarket activities. If Doug is offered a job paying $12 an hour,

• A) he should supply 0 hours in the labor market.
• B) he should supply a positive number of hours in the labor market and allocate no time to nonmarket activities.
• C) he is indifferent between supplying hours to the labor market and using his time in nonmarket activities.
• D) he should supply a positive number of hours in the labor market and to nonmarket activities.

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Definitions:

Cash Flows

The total amount of money being transferred into and out of a business, considered as the lifeblood of corporate finance.

Discounted Payback Period

The time it takes for the cash inflows from a capital investment project to equal the initial outlay, adjusted for the time value of money.

Initial Cost

The amount of money spent to acquire, or invest in, an asset or project before it begins generating revenue.

Rate of Return

The enhancement or diminution in an investment’s value over a fixed span, presented as a percentage of the investment’s original price.