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:

Root Mean Square of Errors

A measure of the differences between values predicted by a model or an estimator and the values observed, expressing the square root of the mean of the squares of these differences.

Actual Value

The true, factual, or real value of a measurement, differing from an estimated or theoretical value.

Forecast Value

The estimated or predicted value of a variable or set of variables at some point in the future.

Mean Square Error

A measure of the average of the squares of the errors—that is, the average squared difference between the estimated values and the actual value.