If the substitution effect is always greater than the income effect, then an individual's labor supply curve will
a. bend backward
b. always have a positive slope
c. always have a negative slope
d. be vertical
e. be horizontal
QUESTION 2If the fraction of the population that is below the official poverty level has decreased, then
a. the number of poor must have increased
b. the number of poor must have decreased
c. the population must have increased
d. the number of poor may have increased or decreased
e. the number of people above the official poverty level must have increased
QUESTION 3Along a backward-bending labor supply curve, the
a. income effect always dominates the substitution effect
b. substitution effect always dominates the income effect
c. substitution effect is always equal to the income effect
d. substitution effect dominates the income effect at high wage rates
e. substitution effect dominates the income effect at low wage rates
QUESTION 4The U.S. poverty rate is higher among households headed by black married couples than those headed by white females.
a. True
b. False
QUESTION 5Children of female heads of households are five times more likely to live in poverty than other children.
a. True
b. False
QUESTION 6The average work week in the United States has declined to fewer than 40 hours even though wage rates have been increasing. The best explanation of this phenomenon is that
a. the labor supply curve shifted to the right
b. the labor demand curve shifted to the right
c. the income effect of rising wages outweighed the substitution effect
d. the income effect of rising wages could not outweigh the substitution effect
e. none of the above
QUESTION 7An 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 costs of leisure do not increase
d. the opportunity costs of working always increase
e. workers are irrational because otherwise they would be violating the law of supply
QUESTION 8Transfer payments have reduced poverty among the elderly, but poverty among females has not fallen.
a. True
b. False
QUESTION 9At a low wage rate,
a. there is no substitution effect
b. there is no income effect
c. the substitution effect usually outweighs the income effect
d. the income effect usually outweighs the substitution effect
e. the disutility of market work is usually high
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