The figure given below shows a backward-bending labor supply curve for an individual. In the figure below, which of the following is true at a wage rate of $14?
Exhibit 12.2
A) The income effect dominates the substitution effect.
B) The substitution effect dominates the income effect.
C) No labor is supplied.
D) The income effect equals the substitution effect.
E) The supply curve is horizontal.
Correct Answer:
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