Which of the Following Statements Are TRUE

question 103

Multiple Choice

Which of the following statements are TRUE?
I. The substitution effect of a wage decrease means that people will work more hours.
II. The income effect of a wage decrease means that people will take more leisure.
III. If wages fall and people work fewer hours, the substitution effect dominates the income effect.
IV. If wages increase and people work fewer hours, the income effect dominates the substitution effect.

• A) I, II, and IV
• B) I and IV
• C) II and III
• D) III and IV

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Definitions:

Useful Life

The estimated period over which a fixed asset is expected to be usable by a company, beyond which it is considered to depreciate.

Average Rate of Return

A financial ratio that calculates the average annual return an investor can expect over the lifetime of an investment, expressed as a percentage of the original investment.

Residual Value

The estimated value that an asset will have at the end of its useful life, after considering depreciation or amortization.

Useful Life

The estimated duration of time over which an asset is expected to be functional and contribute to a company's operations.