The substitution effect in the labor supply decision refers to
a. substituting leisure for work as the wage rate rises
b. substituting market work for nonmarket work as the wage rate falls
c. working more hours as the wage rate falls
d. working fewer hours as the wage rate rises
e. substituting market work for leisure or nonmarket work as the wage rate rises
QUESTION 2Data show that the poorest U.S. demographic group is
a. the elderly because Social Security payments have not kept pace with inflation
b. the elderly because they have no steady income
c. the elderly because poverty increases with age
d. households headed by someone under 18 years of age
e. households headed by someone between 40 and 50 years old
QUESTION 3The income and substitution effects of a change in the wage rate
a. always work in the same direction
b. always work in opposite directions
c. work in opposite directions only if the change is a decrease
d. work in the same direction only if the change is an increase
e. work in the same direction only if the change is a decrease
QUESTION 4Which of the following accounts for approximately three-fourths of all welfare spending?
a. the school lunch program
b. the earned income tax credit
c. unemployment compensation and workers' compensation combined
d. in-kind transfers
e. cash transfers
QUESTION 5By itself, the substitution effect of an increase in the wage rate will
a. always lead to an increase in the quantity of labor supplied
b. always lead to a decrease in the quantity of labor supplied
c. lead to an increase in the quantity of labor supplied only if leisure is like a normal good
d. lead to an increase in the quantity of labor supplied only if leisure is not a normal good
e. lead to an increase in the quantity of labor supplied only if the income effect works in the same direction
QUESTION 6Which of the following is not means-tested?
a. Temporary Assistance for Needy Families (TANF)
b. welfare programs
c. the Food Stamp program
d. Social Security payments to a retiree
e. free and reduced price school lunches for the poor
QUESTION 7Because leisure is a normal good, an increase in income
a. decreases the demand for leisure time and reduces the amount of time allocated to market work
b. decreases the demand for leisure time and increases the amount of time allocated to market work and/or nonmarket work
c. increases the demand for leisure time and reduces the amount of time allocated to market work and nonmarket work
d. increases the demand for leisure time and increases the amount of time allocated to market work and nonmarket work
e. has no impact on the demand for leisure time
Quick Reply
