An Increase in the Real Wage

question 16

Multiple Choice

An increase in the real wage

• A) unambiguously increases consumption and increases labor supply.
• B) increases consumption and has an ambiguous effect on labor supply.
• C) has an ambiguous effect on consumption and increases labor supply.
• D) has an ambiguous effect on both consumption and labor supply.

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Definitions:

Differential Revenue

The difference in revenue generated from two different business decisions, often used in managerial accounting to assess alternatives.

Opportunity Cost

The cost of an alternative that must be forgone in order to pursue a certain action or the benefits you could have received by taking an alternative action.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision, representing potential benefits missed.

Differential Revenue

The additional revenue that is generated from choosing one alternative over another in decision-making processes.