The Income and Substitution Effects of a Change in the Wage

question 81

Multiple Choice

The income and substitution effects of a change in the wage rate _____

• A)always work in the same direction.
• B)always work in opposite directions.
• C)work in opposite directions only if the wage decreases.
• D)work in the same direction only if the wage increases.
• E)work in the same direction only if the wage decreases.

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Definitions:

Labor Efficiency Variance

A discrepancy between the actual working hours and the expected standard hours, multiplied by the predetermined salary rate.

Direct Labor Standards

Direct labor standards are predetermined measures for the amount of labor time and cost that should be associated with producing a unit of product or performing a service.

Standard Cost Variances

The differences between the actual costs and the standard costs for manufacturing or service processes, used to control and manage expenses.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including material and labor costs.