The increase in the quantity of labor supplied in response to a higher wage is called the:
A. income effect.
B. substitution effect.
C. price effect.
D. labor effect.
Answer: C
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Refer to Table 2-7. What is Mickey's opportunity cost of making a hat?
A) 1/10 of an umbrella B) 1/5 of an umbrella C) 5 umbrellas D) 10 umbrellas
When there is market failure due to a negative externality,
a. innocent people will suffer since it cannot be corrected. b. setting price equal to marginal social cost will solve it. c. the free market produces too little output. d. externalities have been taken into account. e. the best solution eliminates the externality entirely.
Which of the following would help explain why the aggregate demand curve slopes downward?
a. An unexpectedly low price level raises the real wage, which causes firms to hire fewer workers and produce a smaller quantity of goods and services. b. A lower price level causes domestic interest rates to rise and the real exchange rate to appreciate, which stimulates spending on net exports. c. A higher price level increases real wealth, which stimulates spending on consumption. d. A lower price level reduces the interest rate, which encourages greater spending on investment goods.
This graph demonstrates the domestic demand and supply for a good, as well as the world price for that good.According to the graph shown, if this economy were to open to trade, which amount of surplus would be transferred?
A. Area BC would be transferred to the consumer. B. Area BC would be transferred to the producer. C. Area BCD would be transferred to the consumer. D. Area BCD would be transferred to the producer.