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
The real wage in Fantasyland has been constant since 1950. The nominal wage in 2015 was $100, and the Consumer Price Index (CPI) was 200 in 2015. What was the nominal wage in 2002 if the CPI was 50 in 2002? A) Nominal wage = $25 B) Nominal wage = $400 C) Nominal wage = […]
Date: September 9th, 2020
Consider two lottery winners, Tino who is 65 years old and Sasha who is 32 years old. Which of these two would be expected to have the larger income effect, all else equal? A) Sasha B) Tino C) Both would have no income effect. D) Both would have equal income effects. ANSWER B
Date: September 9th, 2020
Using the CPI to compensate workers for inflation is appropriate because, in the face of a change in relative prices, people should be allowed to purchase the same bundle as they did before the price changes. Indicate whether the statement is true or false ANSWER False. This assumes that people would still prefer the […]
Date: September 9th, 2020
If a person supplies fewer hours of labor in response to a wage increase, then A) the substitution effect is greater than the income effect. B) the income effect is greater than the substitution effect. C) the income effect equals the substitution effect. D) the person is not maximizing utility. ANSWER B
Date: September 9th, 2020
In response to an increase in the wage rate, the substitution effect will 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 backward bend in her labor supply curve. ANSWER B
Date: September 9th, 2020
What might explain a professional baseball player having lower production the year after signing a multimillion dollar contract? A) the substitution effect B) the endowment effect C) bounded rationality D) the income effect ANSWER D
Date: September 9th, 2020
