An Increase in the Wage Rate Will Lead to a Reduction

question 184

Multiple Choice

An increase in the wage rate will lead to a reduction in the quantity of labor supplied if _____

• A)the substitution effect outweighs the income effect.
• B)the income effect outweighs the substitution effect.
• C)the opportunity cost of leisure does not increase.
• D)the opportunity cost of working always increases.
• E)workers are irrational because otherwise they would be violating the law of supply.

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Definitions:

Absolute Disadvantage

A situation where an individual, country, or company is less efficient in producing goods or services compared to another.

Opportunity Cost

The rejection of advantageous prospects from other paths when one path is chosen.

Free Trade

The absence of restrictions or tariffs on the import and export of goods and services between countries, allowing for the unimpeded flow of goods, services, and capital.

Consumption

Consumption denotes the use of goods and services by households, which plays a crucial role in the economic cycle by driving demand and influencing production.