Link for graphs:

file:///C:/Users/18137/AppData/Local/Temp/budget%20constraint%20and%20indifference%20curve.pdf

Refer to the graphs in the attached document above for assistance in answering these questions.Select the best answer from the choices given, indicate your responses using the question number and the corresponding letter choice.

1. If non-market time is a normal good then an increase in non-labor income will cause desired hours of work to:

A) increase.B) decrease.C) stay the same.D) either decrease or increase.

2. If income is held constant and the wage rate increases, the desired hours of work will

A) increase.B) decrease.C) stay the same.D) change ambiguously.

3. An increase in nonlabor income will cause

A) a pure income effect.B) a pure substitution effect.C) both an income & a substitution effect.D) neither effect.

4. If Alice's wage increases from $6.00 per hour to $6.50 per hour, then she _____________________ before her raise.

A) will want to work more hours thanB) will want to work fewer hours than

C) will want to work the same number of hours asD) may want to work more, fewer, or the same number of hours as

5. If Gene receives a raise in his hourly wage and decides he would like to increase his hours of work, we know that

A) his income effect is greater than his substitution effect.B) his substitution effect is greater than his income effect.

C) his income and substitution effects are equal.D) his income and substitution effects reinforce each other.

6. Studies of the hours of work of older men have found that the substitution effect dominates the income effect. This suggests that, other things the same,

A) that an increase in non-work expenses will cause older men to work shorter hours.

B) that an increase in the tax rate on income will cause older men to work longer hours.

C) show that tax changes have no effect on their labor supply.

D) that older men will retire earlier in those careers where wages fall more as they get older.

7. If a worker's desired hours of labor do not change after a decrease in his wage rate, then his

A) income effect dominates his substitution effect.B) substitution effect dominates his income effect.

C) income and substitution effects are of equal magnitude.D) income and substitution effects are small.

8. A person with ________ indifference curves is most likely to decide not to participate in the labor force.

A) flatB) steepC) straightD) upward-sloping

9. A subsidy to pay for a portion of childcare costs will cause women who are participating in the labor force to work ________ hours.

A) moreB) fewerC) the same number ofD) at least as many

10. A professor declared "with the recent drop in the value of my stock portfolio, I will have to put off retirement by another two years." This decision reflects

A) the substitution effect.B) the income effect.C) the portfolio effect.D) the effect of a spiky budget constraint.