Suppose the typical consumer only purchases food and clothing, and her utility can be expressed as U=F*C. Currently, food costs $5 per unit and clothing costs $2 per unit. Her income is $70. If the price of food increases to $6, compare the resulting Laspeyres price index with a true cost of living index. What […]
Date: September 9th, 2020
Newspaper accounts of the U.S. labor market often point out that many people are working more hours than their parents did. What might explain this phenomenon? A) the substitution effect B) the endowment effect C) bounded rationality D) the income effect ANSWER A
Date: September 9th, 2020
If workers are in the backward-bending section of their labor supply curves, than an increase in the income tax rate will A) increase the tax revenue and increase the number of hours worked. B) increase the tax revenue and decrease the number of hours worked. C) decrease the tax revenue and increase the number of […]
Date: September 9th, 2020
In response to an increase in the wage rate, the income effect will usually cause a person to A) supply fewer hours of labor. B) supply more hours of labor. C) supply the same hours of labor. D) have a horizontal labor supply curve. ANSWER A
Date: September 9th, 2020
A percentage increase in the overall price level is called A) cost of living. B) inflation. C) Paasche index. D) Fischer index. ANSWER B
Date: September 9th, 2020
A tax cut that raises the after-tax wage rate will most likely result in more hours worked if A) tax rates were low already. B) the relevant portion of the labor supply curve is upward sloping. C) the relevant portion of the labor supply curve is downward sloping. D) workers can be easily fooled. […]
Date: September 9th, 2020
The nominal price of a desk increased from $20 in 2005 to $65 in 2016. The Consumer Price Index (CPI) was 125 in 2005 and 250 in 2016. We can say that A) the real price of a desk increased over time. B) the real price of a desk fell over time. C) the real […]
Date: September 9th, 2020
Empirical studies have found that the labor supply curves for most parts of the population are A) backward-bending. B) upward-sloping. C) downward-sloping. D) nearly vertical. ANSWER D
Date: September 9th, 2020
The price of leisure A) is the same for everyone. B) depends on the number of hours worked. C) is measured as foregone earnings. D) is immeasurable. ANSWER C
Date: September 9th, 2020
Wealthy people will tend to have vertical labor supply curves A) only if their income effect just offsets their substitution effect. B) only if their income effect is greater than their substitution effect. C) only if their income effect is less than their substitution effect. D) only if they don’t have an income effect. […]
Date: September 9th, 2020
