Answer:
Option A, “the substitution effect dominates the income effect” is correct.
Explanation:
If the real wage increases then the opportunity cost for leisure will also increase. Therefore, an increase in real wages and a rise in the opportunity cost of leisure induce labor to supply more workforce or labor force. This is known as the substitution effect. Moreover, when this substitution effect is greater than the income effect then the supply curve for labor is upward sloping.
The purpose of this category of interview questions is to obtain factual information about the interviewee.
Answer:
955 unit
Explanation:
Data provided in the question:
Selling price per unit = $670
Variable cost per unit = $250
Total fixed costs = $327,600
Income tax rate = 35%
After tax Desired profit = $47,775
Now,
Before tax profit = [ After tax Desired profit ] ÷ [1 - Tax rate ]
= $47,775 ÷ [1 - 0.35 ]
= $73,500
Contribution required = Total fixed costs + Before tax profit
= $327,600 + $73,500
= $401,100
Contribution margin per unit = Selling price per unit - Variable cost per unit
= $670 - $250
= $420
Therefore,
No of unit required to be sold
= [ Contribution required ] ÷ [Contribution margin per unit ]
= $401,100 ÷ 420
= 955 unit