ECONOMICS
OPPORTUNITY COST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Chose to work more hours because the opportunity cost of leisure has fallen
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Chose to work more because the opportunity cost of not working has risen
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Chose to work less because the opportunity cost of working is higher
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The value of what is received as a result of taking the next best opportunity.
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Detailed explanation-1: -Wage increases cause inflation because the cost of producing goods and services goes up as companies pay their employees more. To make up for the increase in cost, companies must charge more for their goods and services to maintain the same level of profitability.
Detailed explanation-2: -Answer and Explanation: The wage rate is the opportunity cost of (b) leisure. This is because every additional hour spent on leisure means one less hour of labor.
Detailed explanation-3: -The worker’s response to the increase in the opportunity cost of leisure is the substitution effect. Remember that the total change in demand is the sum of the income and substitution effects.
Detailed explanation-4: -An increase in product demand will shift the demand for labor curve to the right, causing both wages and employment to increase.