Assume that the substitution effect dominates the income effect. When workers experience a positive price surprise, they
A. correctly perceive that their real wage rate has fallen, which leads them to work fewer hours.
B. correctly perceive that their real wage rate has risen, which leads them to work more hours.
C. incorrectly perceive that their real wage rate has fallen, which leads them to work fewer hours.
D. incorrectly perceive that their real wage rate has risen, which leads them to work more hours.
Answer: D
You might also like to view...
A good or service or a resource is excludable if
A) it is possible to prevent someone from enjoying its benefits. B) it is not possible to prevent someone from enjoying its benefits. C) its use by one person decreases the quantity available for someone else. D) its use by one person does not decrease the quantity available for someone else.
Moral hazard occurs because people act
A) in the interest of others at all time. B) in the best interest of society. C) in their own self-interest. D) like anarchists.