In labor markets, a change in the wage rate has both an income and a substitution effect. An increase in wages causes an increase in real income but at the same time it increases the relative price of leisure for the worker. If an increase in wage rate causes an individual to work less, _____
a. the income effect dominates the substitution effect
b. the substitution effect dominates the income effect
c. the substitution and income effects cancel each other out
d. then leisure will be referred to as an inferior good
e. the increase in wage rates will cause an increase in the supply of labor
a
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Most of the income received by families and individuals in the United States arises from the ownership of
A) capabilities embodied in human beings. B) corporations. C) industrial, commercial, and residential real estate. D) stocks, bonds, and other financial instruments. E) transnational business enterprises.
According to Keynes's theory of liquidity preference, velocity increases when
A) income increases. B) wealth increases. C) brokerage commissions increase. D) interest rates increase.
If Y = $200 billion, c = 0.75, autonomous consumption = $10 billion, and T = $20 billion, induced saving is
A) $25 billion. B) $50 billion. C) $75 billion. D) $150 billion.
If the present value of all future revenue is positive, then
A) the firm should remain operating, even if it earns negative profit in the short run. B) the firm should shut down if it is earning a negative profit in the short run. C) the firm should shut down if it cannot cover its fixed costs in the short run. D) Unable to determine with the information given.