Because Leisure Is a Normal Good, an Increase in the Wage

question 101

Multiple Choice

Because leisure is a normal good, an increase in the wage rate will result in

• A)an increase in the quantity of labor supplied because of both the substitution effect and the income effect.
• B)a decrease in the quantity of labor supplied because of the substitution effect and an increase in the quantity of labor supplied because of the income effect.
• C)an increase in the quantity of labor supplied because of the substitution effect and a decrease in the quantity of labor supplied because of the income effect.
• D)an increase in the quantity of labor supplied because of the substitution effect. At low wages the income effect causes an increase in the quantity of labor supplied, but at high wages the income effect causes a decrease in the quantity of labor supplied as the wage rises.

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