The Substitution Effect of a Decrease in the Wage Will

question 107

Multiple Choice

The substitution effect of a decrease in the wage will:

• A) decrease leisure, regardless of whether leisure is a normal or inferior good.
• B) increase leisure, regardless of whether leisure is a normal or inferior good.
• C) increase leisure only if leisure is a normal good.
• D) decrease leisure only if leisure is a normal good.

---

Definitions:

Cost of Goods Sold

The direct costs attributable to the production of the products sold by a company.

Finished Goods Inventory

The total value of goods that have completed the production process but have not yet been sold to customers.

Overapplied Overhead

A situation where the amount of overhead allocated to products or services exceeds the actual overhead incurred.

Beginning Balance

The starting balance in an account at the beginning of a new accounting period, carried over from the end of the previous period.