A Decrease in the Real Wage Will Cause an Individual

question 27

Multiple Choice

A decrease in the real wage will cause an individual to increase his or her supply of labour if

• A)the substitution effect is greater than the income effect.
• B)the income effect is greater than the substitution effect.
• C)the substitution effect is positive and the income effect is negative.
• D)the substitution effect is equal to the income effect.

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Definitions:

Variable Costs

Costs that vary with the quantity of output produced.

Average Total Cost

The total cost of production divided by the quantity of output produced, representing the per-unit production cost.

Rising Prices

A situation where the general level of prices for goods and services in an economy increases over a period of time.

Average Total Cost

The total cost of production divided by the quantity of output, encompassing both fixed and variable costs.