Use the Following Figure to Answer the Question : Figure

question 83

Multiple Choice

Use the following figure to answer the question : Figure 17-1 : shows the weekly income (in dollars) and leisure (in hours) of a worker using an indifference curve and a budget line.

-Refer to Figure 17-1.If the number of leisure hours is OL₁ after a change in the wage rate,it implies that:

• A)the income effect of the wage change is greater than the substitution effect.
• B)the income effect of the wage change is less than the substitution effect.
• C)the income effect of the wage change exactly offsets the substitution effect.
• D)the income and substitution effects of a wage change operate in the same direction.

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