Refer to the Following Graph

question 48

Multiple Choice

refer to the following graph:







-(appendix) If the two isoquants represent profit maximizing levels of output for two different wage rates,the move from point A to point B represents the:

• A)output effect of a reduction in the wage
• B)output effect of an increase in the wage
• C)substitution effect of a reduction in the wage
• D)substitution effect of an increase in the wage

---

Definitions:

Income Effect

The change in consumption resulting from a change in real income.

Theory of Consumer Choice

An economic framework describing how consumers make decisions to allocate their resources optimally among various goods and services.

Indifference Curve

A graph representing combinations of goods among which a consumer is indifferent, showing trade-offs between two goods.

Budget Line

A graphical representation of all possible combinations of two goods that can be purchased with a given budget and prices.