Figure 17-2
-Refer to Figure 17-2.Which of the following is true if the wage rate increases from W0 to W1?

Question

Figure 17-2 
-Refer to Figure 17-2.Which of the following is true if the wage rate increases from W0 to W1?

Quizplus · Accepted Answer

The increase in wage rate causes the substitution effect to dominate, leading to an increase in labor supply. The income effect may also cause a decrease in labor supply. However, in this case, the substitution effect is larger than the income effect, resulting in an overall increase in labor supply. Therefore, the answer is B.

Figure 17-2 -Refer to Figure 17-2.Which of the Following Is True If