If Your Labor Supply Increases When You Get a Raise

question 284

Multiple Choice

If your labor supply increases when you get a raise, which of the following is TRUE?

• A) Your substitution effect is greater than your income effect.
• B) Your substitution effect is less than your income effect.
• C) Your substitution effect equals your income effect.
• D) None of the above answers is correct.

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Definitions:

Nonsystematic Risk

The risk associated with an individual asset or investment, resulting from factors specific to its issuer's performance and not the broader market.

Security Characteristic Line

A graph that shows the relationship between the returns of a security versus the returns of the market, used in the analysis of a security's risk and return.

Benchmark Error

Use of an inappropriate proxy for the true market portfolio.