The substitution effect of an increase in the wage rate on the quantity of leisure demanded
A. gives people less purchasing power and so they will demand less leisure.
B. makes leisure more expensive which leads people to work more.
C. gives people more purchasing power and causes people to demand more leisure.
D. makes leisure less expensive which causes people to work less.
Answer: B
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The causes of prosperity that link high levels of prosperity to high levels of inputs of production, without explaining why the levels of those inputs are high, are referred to as:
A) fundamental causes of prosperity. B) implicit causes of prosperity. C) proximate causes of prosperity. D) explicit causes of prosperity.
When people who buy insurance change their behavior after the purchase because they are protected from loss by the insurance, the insurance market is said to face the problem of
A) economic irrationality. B) asymmetric information. C) adverse selection. D) moral hazard.