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The Substitution Effect of an Increase in the Wage Rate

Question 29

Multiple Choice

The substitution effect of an increase in the wage rate will _____


A) always lead to an increase in the quantity of labor supplied.
B) always lead to a decrease in the quantity of labor supplied.
C) lead to an increase in the quantity of labor supplied only if leisure is a normal good.
D) lead to an increase in the quantity of labor supplied only if leisure is not a normal good.
E) lead to an increase in the quantity of labor supplied only if the income effect works in the same direction.

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