Tyler's wage rises and he chooses to increase the number of hours he supplies to the labor market. What does this imply about the relative sizes of the substitution effect and the income effect? Explain
What will be an ideal response?
This must mean that the substitution effect outweighs the income effect. The substitution effect of a wage increase implies that leisure is more expensive and the individual will work more. The income effect suggests that since the worker is better off (and leisure is a normal good), the worker will work less. Since Tyler chooses to work more, the substitution effect must be larger.
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Which of the following is the government not permitted to do with surplus farm goods?
a. sell to foreign countries at lower than market prices b. support child nutrition programs c. give the food to charitable food banks d. compete with farm-goods producers e. destroy the food
If Hermione pays $10.00 in taxes on $100 of income and $10.25 on $101 of income, which of the following is not true?
A. Her marginal tax rate at $100 is 25 percent. B. Her average tax rate at $100 is 10 percent. C. She faces a progressive tax. D. Her marginal tax rate at $100 is 10.25 percent.