Use the Following to Answer Questions

Multiple Choice

Use the following to answer questions
Figure: Joanna's Time Allocation Budget Line
-(Figure: Joanna's Time Allocation Budget Line) Joanna's Time Allocation Budget Line depicts what happens when she can choose how to spend 40 hours. If Joanna's wage rate increases and she ends up working more hours, for her:

A) the substitution effect dominates.
B) the income effect dominates.
C) the substitution and income effects cancel each other out.
D) the substitution effect becomes ineffective.
Answer Key