Mickey Got a Raise from $14 an Hour to $20

question 350

Multiple Choice

Mickey got a raise from $14 an hour to $20 an hour. As a result of the wage increase, Mickey desires to work more hours and take less hours of leisure. For Mickey

• A) the substitution effect dominates the income effect.
• B) the income effect dominates the substitution effect.
• C) the substitution effect must equal the income effect.
• D) the substitution effect must be zero.

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