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Empirical Evidence Seems to Suggest That the Wage Elasticity of the Supply

Question 13

Multiple Choice

Empirical evidence seems to suggest that the wage elasticity of the supply of labor is small and positive. It must be true, therefore, that


A) the substitution effect of a change in the wage rate should be expected to exceed the associated income effect by a small amount.
B) the substitution effect of a change in the wage rate should be expected to fall short of the associated income effect by a small amount.
C) both the income and substitution effects of a change in the wage rate should be expected to be small and of opposite signs.
D) both the income and substitution effects of a change in the wage rate should be expected to be of the same signs.
E) none of the above.

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