When the wage rate rises, a worker chooses to replace some leisure hours with work hours, even if he would remain equally well off. This phenomenon is known as
a. compensating differential.
b. the income effect.
c. the substitution effect.
d. intertemporal substitution.
c. the substitution effect.
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Optimization can be achieved using either of two techniques of cost-benefit analysis. Which of the following correctly identifies the techniques?
A) Optimization in levels and optimization in programs B) Optimization in levels and optimization in differences C) Optimization in programs and optimization in frames D) Optimization in differences and optimization in frames
Dustin's copy shop can use four alternative plants. The figure above shows the average total cost curves for Plant 1 (ATC1), Plant 2 (ATC2), Plant 3 (ATC3), and Plant 4 (ATC4). Dustin's Plant 2 will be economically efficient if the firm produces
A) 2,000 copies per day. B) 4,800 copies per day. C) 5,300 copies per day. D) 6,000 copies per day.
Under the gold standard system, if the par exchange rate is $1 = 2 pounds, but the market exchange rate in the United Kingdom is $1 = 1 pound, then a person interested in arbitrage would:
A) buy dollars in the United Kingdom to be shipped to the United States and exchanged for a larger quantity of gold. B) find that it is not possible to engage in arbitrage. C) convert dollars into pounds in the United States and sell it for gold in the United Kingdom. D) lose money by trying to exploit any price difference.
If the demand curve is a vertical line, it means that:
A. regardless of price, the quantity demanded is a constant amount. B. regardless of quantity, the price is a constant amount. C. the good is inferior. D. the good has many substitutes.