If an Individual's Labor Supply Curve Is Downward Sloping, This

question 139

Multiple Choice

If an individual's labor supply curve is downward sloping, this indicates that:

• A) the individual has become wealthier.
• B) the income effect dominates the substitution effect.
• C) the substitution effect dominates the income effect.
• D) the individual faces a diminishing marginal utility for leisure.

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Definitions:

Sensitivity Analysis

Indicates exactly how much net present value will change in response to a given change in an input variable, other things held constant. Sensitivity analysis is sometimes called “what if” analysis because it answers this type of question.

Stand-alone Risk

The risk associated with a specific project or investment, considered independently from the broader company or portfolio risks.

NPV

Net Present Value; a calculation that compares the value of all cash inflows and outflows of a project or investment using a discount rate.

WACC (Weighted Average Cost of Capital)

A calculation of a firm's cost of capital in which each category of capital is proportionately weighted, including equity and debt.