Cross-Sectional Regression Analyses That Identify the Effect of Taxes on Labor

question 6

Multiple Choice

Cross-sectional regression analyses that identify the effect of taxes on labor supply may be biased because:

• A) people who earn high wages may have a higher preference for work than do people who earn low wages.
• B) people who earn low wages may have a higher preference for work than do people who earn high wages.
• C) all people used in such studies work the same number of hours.
• D) everyone receives the same amount of utility from leisure time.

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Definitions:

Future Alternatives

Potential future courses of action or strategies that are explored as options for decision-making or problem-solving.

Availability Heuristic

A mental shortcut that relies on immediate examples that come to a person's mind when evaluating a specific topic, concept, method, or decision.

Evaluate Probabilities

The process of assessing the likelihood of various outcomes in order to make informed decisions under conditions of uncertainty.

Recall from Memory

The cognitive process of retrieving information from the past, stored in the human brain.