By Itself, the Substitution Effect of an Increase in the Wage

question 100

Multiple Choice

By itself, the substitution effect of an increase in the wage rate will

• A)always lead to an increase in the quantity of labor supplied
• B)always lead to a decrease in the quantity of labor supplied
• C)lead to an increase in the quantity of labor supplied only if leisure is like a normal good
• D)lead to an increase in the quantity of labor supplied only if leisure is not a normal good
• E)lead to an increase in the quantity of labor supplied only if the income effect works in the same direction

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Definitions:

Alternative Hypothesis

The hypothesis that is tested against the null hypothesis in statistical hypothesis testing, representing a statement that indicates some effect or difference.

Critical Value

A threshold value in hypothesis testing that defines the boundary for rejecting the null hypothesis; it is determined by the chosen significance level.

Null Hypothesis

In statistics, it posits that there is no effect or difference among the groups being studied or variables being compared.

Alpha

In hypothesis testing, alpha level represents the threshold for rejecting the null hypothesis, often set at 0.05 or 5% risk of Type I error.