Assume Leisure Is an Inferior Good Instead of a Normal

question 220

Multiple Choice

Assume leisure is an inferior good instead of a normal good. The income effect of a wage decrease will lead to a ________ demand for leisure and a ________ labor supply.

• A) higher; higher
• B) higher; lower
• C) lower; higher
• D) lower; lower

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Definitions:

Direct Labor-Hours

The total number of hours worked by employees who are directly involved in the production process, typically used as a base for applying manufacturing overhead costs.

Overhead Cost

Indirect costs of a business that are not directly tied to a specific product or service, such as rent, utilities, and administrative expenses.

Activity-Based Costing

A costing method that assigns costs to products or services based on the activities they require, aiming for more precise cost allocation.

Machine-Hours

Represents the amount of time machines are operational during production, critical for planning and cost allocation purposes.