Assuming consumption and leisure are normal goods, hours worked will fall when the wage increases if
A) the income effect dominates the substitution effect.
B) the substitution effect dominates the income effect.
C) the income and substitution effect move in the same direction (i.e., if they are of the same sign) .
D) the income and substitution effect move in the opposite direction (i.e., if they are of the opposite sign) .
E) the wage increase is accompanied by an increase in prices.
Correct Answer:
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