Which Statement Is TRUE in the Standard Model of Labor

question 22

Multiple Choice

Which statement is TRUE in the standard model of labor supply?

• A) If the income effect dominates the substitution effect,higher wages lead to a reduction in the quantity of labor supplied.
• B) If the substitution effect dominates the income effect,higher wages lead to an increase in the quantity of labor supplied.
• C) Higher wages always lead to a reduction in the quantity of labor supplied.
• D) Higher wages always lead to an increase in the quantity of labor supplied.

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Definitions:

Rate of Return

A measure of the profitability of an investment, calculated as a percentage of the original cost of the investment.

Dividend Yield

An indicator showing the annual amount a corporation distributes as dividends compared to its current share value.

Required Rate

The minimum return that investors expect to earn from an investment to make it worth their while.

Dividends Grow

The increase in the dividend amount paid out by a company to its shareholders over time.