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.

---

Definitions:

Wavelength

The distance between successive crests of a wave, often used to describe the spectrum of electromagnetic radiation.

Visible Light

The portion of the electromagnetic spectrum that is visible to the human eye, ranging approximately from 390 to 700 nanometers wavelength.

Energy

The capacity to perform work or to produce changes within a system, existing in kinetic, potential, thermal, electrical, chemical, nuclear, or other various forms.

Violet

A color at the end of the visible spectrum of light, next to blue, and opposite of yellow.