Question : 21) Caroline’s hourly wage rate was reduced from $22 to : 1381225

 

21) Caroline’s hourly wage rate was reduced from $22 to $16. As a result of the wage decrease, Caroline desires to work more hours and take fewer hours of leisure. For Caroline

A) the income effect must be zero.

B) the substitution effect dominates the income effect.

C) the income effect dominates the substitution effect.

D) the substitution effect must equal the income effect.

 

22) Empirical evidence with respect to the labor supply decision suggests that

A) the income effect seems to dominate for most people, which means that the aggregate labor supply responds negatively to an increase in the wage rate.

B) the substitution effect seems to dominate for most people, which means that the aggregate labor supply responds positively to an increase in the wage rate.

C) the substitution effect seems to dominate for most people, which means that the aggregate labor supply responds negatively to an increase in the wage rate.

D) the income effect seems to dominate for most people, which means that the aggregate labor supply responds positively to an increase in the wage rate.

 

23) If the wage rate falls, consumption

A) rises because the income and substitution effects are working in opposite directions to change consumption.

B) falls because the income and substitution effects are both working in the same direction to decrease consumption.

C) rises because the income and substitution effects are both working in the same direction to increase consumption.

D) falls because the income and substitution effects are working in opposite directions to change consumption.

24) The wage rate that is adjusted for changes in the price level over time is the

A) expected future wage rate.

B) nominal wage rate.

C) real wage rate.

D) money wage rate.

 

25) Arnold’s nominal wage increased by 3%, and the prices of goods that Arnold buys increased by 5%. Arnold’s real wage has

A) increased.

B) remained constant.

C) decreased.

D) changed by 8%, but the direction of the change is ambiguous.

 

26) When the substitution effect is greater than the income effect, Juanita will NOT supply more work if

A) the wage rate and the price level increase proportionately.

B) the percentage increase in the price level is greater than the percentage change in wages.

C) wages are falling faster than prices.

D) all of the above

Refer to the information provided in Table 16.1 below to answer the questions that follow.

 

Table 16.1

 

27) Refer to Table 16.1. What is the real wage rate in 2012 using 2011 as the base year?

A) $7.14

B) $9.80

C) $10.00

D) $14.00

 

28) Refer to Table 16.1. What is the real wage rate in 2013 using 2011 as the base year?

A) $6.84

B) $8.86

C) $9.29

D) $13.30

 

29) Refer to Table 16.1. What is the real wage rate in 2013 using 2012 as the base year?

A) $9.28

B) $9.58

C) $17.64

D) $19.00

30) Refer to Table 16.1. What is the real wage rate in 2011 using 2013 as the base year?

A) $6.00

B) $6.84

C) $11.40

D) $13.30

 

 

 

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