Which of the Following Best Describes the Substitution Effect of a Wage

question 39

Multiple Choice

Which of the following best describes the substitution effect of a wage decrease?

• A)The firm's marginal cost decreases,the firm desires to produce less output,and therefore less labor is required
• B)The cost of labor is relatively lower,causing the firm to use relatively more labor
• C)The firm's labor demand curve less elastic,causing it to employ less labor
• D)The firm's labor demand curve becomes more inelastic,causing it to employ less labor

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Definitions:

Taxes and Tariffs

Mandatory financial charges imposed by a government on products, incomes, or activities, and tariffs specifically refer to taxes on imports or exports between sovereign states.

NPV

Net Present Value, a financial metric used to assess the profitability of an investment or project by discounting future cash flows to their present value.

Financial Return

The profit or loss generated on an investment over a particular period, expressed as a percentage of the investment's initial cost.

Rate of Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment's cost.