The income effect of a higher wage rate results in a
I. higher income as people work more.
II. person choosing to decrease work hours as income increases.
III. backward-bending labor supply curve.
A) I and II
B) II and III
C) I and III
D) II only
B
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A tax is efficient if it imposes a small excess burden relative to the tax revenue it raises
Indicate whether the statement is true or false
A perfectly competitive firm is a "price maker."
a. True b. False Indicate whether the statement is true or false
The Paradox of Financial Innovation states that:
a. What once was thought of as a "financial innovation" is really just old wine in a new bottle (i.e., nothing new). b.When a single firm, in isolation, tries to de-lever its balance sheet, the net effect is often for its leverage to rise. c. Financial innovation is a puzzle (i.e., a paradox) and always will be. d. When a large portion of the market tries to de-lever its balance sheet, asset prices fall, thereby causing leverage to increase (not decrease). e. If not fully understood by users and regulators, financial instruments that were created to reduce risk can end up increasing them.
A Ponzi scheme has the following characteristics, except:
A. It promises a much higher expected return relative to the investment risk involved B. It seems to involve a significantly lower risk relative to the expected returns promised C. Its implied risk-return combination (or point) lies below the security market line D. Trust plays a very important role, with investors believing in the promoter's ability to somehow prevent arbitrage