The Case in Point on Airline Pilots Indicated That a Decreased

question 169

Multiple Choice

The Case in Point on Airline Pilots indicated that a decreased wage for some pilots resulted in:

• A) a decreased quantity of labor supplied because the substitution effect was the only relevant factor in this situation.
• B) an increased quantity of labor supplied because the substitution effect was the only relevant factor in this situation.
• C) a decreased quantity of labor supplied because the substitution effect dominated the income effect.
• D) an increased quantity of labor supplied because the income effect dominated the substitution effect.

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Definitions:

Returns to Scale

Describes how output changes in response to a proportional increase in all inputs in the production process; can be classified as increasing, constant, or decreasing.

Consumer Surplus

The gap between the aggregate amount consumers are willing to pay for a good or service and the sum they actually pay.

Producer Surplus

The difference between the amount producers are willing to accept for a good or service relative to its market price, essentially the profit producers make.

Price Discrimination

Price discrimination occurs when a seller charges different prices for the same product or service to different customers, based on the willingness to pay, often to maximize revenue.