A backward-bending labor supply curve implies that A) the substitution effect dominates the income effect at higher wage rates but not at lower wage rates. B) the substitution effect dominates the income effect at lower wage rates but not at higher wage rates. C) leisure is an inferior good. D) workers are irrational. ANSWER […]
If Bobby thinks that leisure is an inferior good, then his labor supply curve A) is backward bending. B) is always negatively sloped. C) is always positively sloped. D) does not exist. ANSWER C
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 […]
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
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 […]
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
A percentage increase in the overall price level is called A) cost of living. B) inflation. C) Paasche index. D) Fischer index. ANSWER B
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. […]
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 […]
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
