Question 1

Lakisha's labour supply curve is downward sloping for wage rates greater than $40 per hour and upward sloping for wage rates less than $40 per hour.If leisure is a normal good for Lakisha and if the wage is _____,the substitution effect of a wage increase is _____ than the income effect.

Accepted Answer

Since Lakisha's labour supply curve is downward sloping for wage rates greater than $40 per hour and upward sloping for wage rates less than $40 per hour, she exhibits backward-bending labour supply curve.

If leisure is a normal good for Lakisha, then the income effect of a wage increase will be negative, which means that as her wage rate increases, her purchasing power will increase, and she may choose to work less and increase her leisure time.

However, the substitution effect of a wage increase will be positive, which means that as her wage rate increases, the opportunity cost of leisure time increases, and hence she will choose to work more.

Since the labour supply curve is backward-bending, the substitution effect of a wage increase is less than the income effect only when the wage rate is greater than $40. Therefore, the correct answer is (C) greater than $40 and less.

Question 2

The price of an extra hour of leisure is:

Accepted Answer

The price of an extra hour of leisure is the hourly wage rate. This is because in order to have an extra hour of leisure, one has to give up the opportunity to work and earn an hourly wage. Therefore, the price of that hour of leisure is the same as the wage rate that could have been earned during that hour.

Question 3

The opportunity cost of an hour of leisure:

Accepted Answer

The opportunity cost of an hour of leisure is the amount of money that could have been earned if that hour had been spent working instead. Therefore, the hourly wage rate is the best measure of the opportunity cost of an hour of leisure. Option A is incorrect because the minimum wage may not reflect the actual wage rate of the individual. Option C is incorrect because the opportunity cost is not affected by how productive or unproductive the activity is. And option D is incorrect because engaging in any activity during leisure time does not affect the opportunity cost; it is still the same as the wage rate that could have been earned during that hour.

Question 4

Lisa works 46 hours a week at $10 an hour.If her wage increases to $16.50:

Accepted Answer

If leisure is a normal good, the income effect implies that with higher wages, Lisa can afford more leisure, thus working less.

Question 5

A _____ wage will _____ the _____ leisure.

Accepted Answer

According to the theory of labor-leisure choice, as wages increase, the opportunity cost of leisure also increases. This means that individuals are willing to work more hours to earn the higher wage, leading to an increase in the amount of time spent on work and a decrease in the amount of leisure time. Therefore, a higher wage will increase the opportunity cost of leisure.

Question 6

Suppose that Professor Jones receives a promotion and an increase in her annual salary.Her labour supply curve will be _____ if the substitution effect is _____ than the income effect.

Accepted Answer

When the substitution effect is greater than the income effect, the individual's labor supply curve will be upward sloping. This is because the substitution effect leads individuals to work more as the wage rate increases since the opportunity cost of leisure time has increased. However, the income effect may either reinforce or weaken the substitution effect. If the income effect is smaller, the overall effect will reinforce the substitution effect and lead to a steeper upward sloping labor supply curve. Therefore, choice A is the correct answer.

Question 7

The opportunity cost of an extra hour of leisure is:

Accepted Answer

The opportunity cost of an extra hour of leisure is the wage rate because if someone decides to spend an additional hour in leisure, they are giving up the potential income they could earn by working that hour. Therefore, the value of the alternative choice (working) is equal to the wage rate.

Question 8

André has asked his boss for a pay raise.His boss is concerned that if he increases André's wage,André might work less.In other words,André's boss is concerned that leisure is a normal good for André and that his:

Accepted Answer

André's boss is concerned about the income effect being greater than the substitution effect. This means that with a higher income from the raise, André might value leisure time more (since leisure is a normal good) and thus work less, as the additional income allows him to afford more leisure. This concern reflects the idea that the income effect (wanting more leisure as income increases) could outweigh the substitution effect (working more because the wage rate is higher).

Question 9

The _____ effect of a _____ wage causes individuals to substitute _____.

Accepted Answer

The substitution effect of a higher wage causes individuals to substitute labour for leisure, as the opportunity cost of leisure increases. This means that individuals are willing to work more to earn the higher wage, reducing the amount of leisure they enjoy.

Question 10

John is an entrepreneur who owns an auto body repair shop.John's business is booming,and his salary is rising.John's labour supply curve will be _____ if the substitution effect is _____ the income effect.

Accepted Answer

If the substitution effect is smaller than the income effect, John will work fewer hours as his salary rises, leading to a downward sloping labor supply curve.

Question 11

A wage _____ raises the quantity of labour supplied through a strong _____ effect.

Accepted Answer

An increase in wage is likely to raise the quantity of labour supplied due to a substitution effect, where individuals are more likely to work more hours at a higher wage rate instead of engaging in leisure activities.

Question 12

Assume that Stan just received a promotion and raise.In terms of labour supply,the substitution effect of a higher wage will lead him to:

Accepted Answer

The substitution effect of a higher wage means that Stan can now earn more per hour worked, which makes working more attractive. As a result, he will choose to supply more hours of labour, as he will earn more money for the same amount of work.

Question 13

Gabriella often faces a trade-off between time at the beach and time working as a model.She earns $40 per hour as a model and values going to the beach at the same price.When explaining this to her parents,she says,"The marginal utility per hour working is the same as the marginal utility per hour of going to the beach." This example illustrates:

Accepted Answer

Gabriella is trying to find the optimal time allocation between working as a model and going to the beach. She is facing a trade-off between the two activities and has to choose the optimal combination that maximizes her satisfaction or utility. The fact that the marginal utility per hour of working is equal to the marginal utility per hour of going to the beach suggests that she is indifferent between the two activities. This means that she can allocate her time between the two activities in such a way that the marginal utility of each hour spent on either activity is the same. This results in an optimal time allocation that maximizes her utility or satisfaction. Therefore, the best choice is D, optimal time allocation.

Question 14

Suppose that the government increases the child tax credit,which increases the after-tax income of families with children.How will this decision affect the amount of labour supplied by parents,assuming that leisure is a normal good?

Accepted Answer

The increase in after-tax income due to the child tax credit can lead to two opposing effects: the income effect, which may cause parents to work less as they can maintain the same standard of living with less work, and the substitution effect, which may cause parents to work more as the relative cost of leisure increases. Without knowing which effect dominates, we cannot determine the net impact on labour supply.

Question 15

Tim works 51 hours per week,and his wage is $35 per hour.If his wage increases to $70 per hour:

Accepted Answer

The answer of Tim works 51 hours per week,and his...

Question 16

Scott's wage is $25 per hour and he works 50 hours a week,which is his optimal labour supply at that wage.His marginal utility of 1 hour of leisure is equal to the:

Accepted Answer

The marginal utility of 1 hour of leisure is equal to the marginal utility he gets from $25 worth of goods because $25 is the wage he foregoes for an hour of leisure.

Question 17

A higher wage _____ the price of _____ and _____ workers' incomes.The result pulls the quantity of labour supplied in _____ direction(s).

Accepted Answer

A higher wage increases the price of leisure (since leisure becomes more costly in terms of foregone wages) and increases workers' incomes. This can lead to an increase in the quantity of labor supplied due to the substitution effect, but also a decrease due to the income effect, pulling in opposite directions.

Question 18

Which statement is TRUE?

Accepted Answer

Leisure is usually a normal good, meaning that as income increases, the demand for leisure also increases. This is because people have more disposable income to spend on activities that they enjoy.

Question 19

One reason that wage discrimination based on gender or ethnicity can continue is:

Accepted Answer

Market interference or market failure, such as above-equilibrium wages, can perpetuate wage discrimination by preventing the labor market from adjusting in a way that would eliminate wage disparities based on gender or ethnicity.

Question 20

The more work people do,all other things unchanged,the:

Accepted Answer

The more work people do, the less leisure time they have. This is because time spent working takes away from time that could be used for leisure activities.

Quiz 19: Factor Markets and the Distribution of Income

Lakisha's labour supply curve is downward sloping for wage rates greater than $40 per hour and upward sloping for wage rates less than $40 per hour.If leisure is a normal good for Lakisha and if the wage is _,the substitution effect of a wage increase is _ than the income effect.

The price of an extra hour of leisure is:

The opportunity cost of an hour of leisure:

Lisa works 46 hours a week at $10 an hour.If her wage increases to $16.50:

A ___ wage will _ the ___ leisure.

Suppose that Professor Jones receives a promotion and an increase in her annual salary.Her labour supply curve will be _ if the substitution effect is _ than the income effect.

The opportunity cost of an extra hour of leisure is:

André has asked his boss for a pay raise.His boss is concerned that if he increases André's wage,André might work less.In other words,André's boss is concerned that leisure is a normal good for André and that his:

The ___ effect of a _ wage causes individuals to substitute ___.

John is an entrepreneur who owns an auto body repair shop.John's business is booming,and his salary is rising.John's labour supply curve will be _ if the substitution effect is _ the income effect.

A wage _ raises the quantity of labour supplied through a strong _ effect.

Assume that Stan just received a promotion and raise.In terms of labour supply,the substitution effect of a higher wage will lead him to:

Suppose that the government increases the child tax credit,which increases the after-tax income of families with children.How will this decision affect the amount of labour supplied by parents,assuming that leisure is a normal good?

Tim works 51 hours per week,and his wage is $35 per hour.If his wage increases to $70 per hour:

Scott's wage is $25 per hour and he works 50 hours a week,which is his optimal labour supply at that wage.His marginal utility of 1 hour of leisure is equal to the:

A higher wage ___ the price of _ and _ workers' incomes.The result pulls the quantity of labour supplied in ___ direction(s) .

Which statement is TRUE?

One reason that wage discrimination based on gender or ethnicity can continue is:

The more work people do,all other things unchanged,the:

Quiz 19: Factor Markets and the Distribution of Income

Lakisha's labour supply curve is downward sloping for wage rates greater than $40 per hour and upward sloping for wage rates less than $40 per hour.If leisure is a normal good for Lakisha and if the wage is _____,the substitution effect of a wage increase is _____ than the income effect.

The price of an extra hour of leisure is:

The opportunity cost of an hour of leisure:

Lisa works 46 hours a week at $10 an hour.If her wage increases to $16.50:

A _____ wage will _____ the _____ leisure.

Suppose that Professor Jones receives a promotion and an increase in her annual salary.Her labour supply curve will be _____ if the substitution effect is _____ than the income effect.

The opportunity cost of an extra hour of leisure is:

André has asked his boss for a pay raise.His boss is concerned that if he increases André's wage,André might work less.In other words,André's boss is concerned that leisure is a normal good for André and that his:

The _____ effect of a _____ wage causes individuals to substitute _____.

John is an entrepreneur who owns an auto body repair shop.John's business is booming,and his salary is rising.John's labour supply curve will be _____ if the substitution effect is _____ the income effect.

A wage _____ raises the quantity of labour supplied through a strong _____ effect.

Assume that Stan just received a promotion and raise.In terms of labour supply,the substitution effect of a higher wage will lead him to:

Suppose that the government increases the child tax credit,which increases the after-tax income of families with children.How will this decision affect the amount of labour supplied by parents,assuming that leisure is a normal good?

Tim works 51 hours per week,and his wage is $35 per hour.If his wage increases to $70 per hour:

Scott's wage is $25 per hour and he works 50 hours a week,which is his optimal labour supply at that wage.His marginal utility of 1 hour of leisure is equal to the:

A higher wage _____ the price of _____ and _____ workers' incomes.The result pulls the quantity of labour supplied in _____ direction(s) .

Which statement is TRUE?

One reason that wage discrimination based on gender or ethnicity can continue is:

The more work people do,all other things unchanged,the:

Lakisha's labour supply curve is downward sloping for wage rates greater than $40 per hour and upward sloping for wage rates less than $40 per hour.If leisure is a normal good for Lakisha and if the wage is _,the substitution effect of a wage increase is _ than the income effect.

A ___ wage will _ the ___ leisure.

Suppose that Professor Jones receives a promotion and an increase in her annual salary.Her labour supply curve will be _ if the substitution effect is _ than the income effect.

The ___ effect of a _ wage causes individuals to substitute ___.

John is an entrepreneur who owns an auto body repair shop.John's business is booming,and his salary is rising.John's labour supply curve will be _ if the substitution effect is _ the income effect.

A wage _ raises the quantity of labour supplied through a strong _ effect.

A higher wage ___ the price of _ and _ workers' incomes.The result pulls the quantity of labour supplied in ___ direction(s) .