In the Context of Outsourcing, Consider the Case Where Domestic

question 26

Multiple Choice

In the context of outsourcing, consider the case where domestic labour and foreign labour are almost perfect complements. If there is an increase in the wage paid to domestic labour, then which of the following statements is true?

• A) There will be a small substitution effect away from domestic labour, but the scale effect will work toward domestic labour.
• B) There will be a small substitution effect and a larger scale effect away from domestic labour.
• C) There will be a small substitution effect toward domestic labour, but the scale effect will work in favour of domestic labour.
• D) There will be a large substitution effect and a smaller scale effect away from domestic labour.
• E) There will be no substitution effect but only scale effect.

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Definitions:

Water

A chemical compound, H2O, essential for all known forms of life, characterized by its liquid state at room temperature and its ability to dissolve many substances.

Helium

Helium is a chemical element with symbol He and atomic number 2, known as the second lightest and second most abundant element in the observable universe, primarily used in cryogenics and as an inert gas shield in arc welding.

Lewis Structures

Diagrams that represent the valence electrons of atoms within a molecule, showing how they are bonded together.

Double Bond

A chemical bond in which two pairs of electrons are shared between two atoms.