68 Answer True False Diff 2 Page Ref 551551 Topic Substitution and Income

68 answer true false diff 2 page ref 551551 topic

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68)Answer:TrueFalseDiff: 2Page Ref: 551/551Topic: Substitution and Income Effects of a Wage ChangeLearning Outcome: Micro 17: Explain the effects of the factors of production, factor demand, and factorsupply and labor in factor marketsAACSB: Reflective Thinking69) An increase in wages raises the opportunity cost of leisure and leads to an increase in the quantitysupplied of labor.69)Answer:TrueFalseDiff: 2Page Ref: 551/551Topic: The Supply of LaborLearning Outcome: Micro 17: Explain the effects of the factors of production, factor demand, and factorsupply and labor in factor marketsAACSB: Reflective ThinkingSHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.70) What is the substitution effect of a wage increase? What is the income effect of a wageincrease? Under what conditions will a workerʹs labor supply curve become downwardsloping?70)Answer: The substitution effect refers to the fact that an increase in the wage raises theopportunity cost of leisure and causes a worker to devote more time to working andless time to leisure. The income effect of a wage increase refers to the fact that anincrease in the wage increases a workerʹs purchasing power and causes an increasein the quantity demanded of all normal goods including leisure. Therefore, theincome effect of a wage increase causes a worker to reduce the quantity of laborsupplied. The labor supply curve becomes downward sloping if the income effectof a wage increase is greater than the substitution effect of the wage increase.Diff: 3Page Ref: 551/551Topic: Substitution and Income Effects of a Wage ChangeLearning Outcome: Micro 17: Explain the effects of the factors of production, factor demand, andfactor supply and labor in factor marketsAACSB: Reflective Thinking22
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71) Serafina was earning $75 per hour and working 50 hours per week. Serafinaʹs wage rose to$90 per hour, and as a result, she now works 60 hours per week. What can you concludefrom this information about the income effect and the substitution effect of a wage changefor Serafina?71)Answer: We can conclude that Serafinaʹs substitution effect (higher wages lead to higheropportunity cost of leisure, leads to lower leisure, leads to more labor) is greaterthan her income effect (higher wages lead to higher income, leads to more leisure,
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