A 25- year- old individual is choosing between three occupations

Question

A 25- year- old individual is choosing between three occupations - an entertainer with large earnings when young but those earnings will decline with age; a teacher with constant income over time; and a physician with very low initial earnings but earnings that will continue to rise over time. Other than income the occupations are equally preferable. If the annual earnings of each occupation are added, the total is highest for the career as a physician, second as an entertainer, and lowest as a teacher. Which of the following is true?
A)It makes economic sense to add the annual earnings of an occupation only if the interest rate is positive.
B)Being a doctor is preferable for a low enough interest rate.
C)Being an entertainer is preferable for a low enough interest rate
D)Being a teacher is preferable for a certain value of the interest rate.

Quizplus · Accepted Answer

Being a doctor is preferable for a low enough interest rate because the value of future earnings increases relative to present earnings as the interest rate decreases, making the physician's career, which has increasing earnings over time, more attractive financially.