Multiple Choice
Assume that the substitution effect dominates the income effect. When workers experience a positive price surprise, they
A) correctly perceive that their real wage rate has fallen, which leads them to work fewer hours.
B) incorrectly perceive that their real wage rate has fallen, which leads them to work fewer hours.
C) correctly perceive that their real wage rate has risen, which leads them to work more hours.
D) incorrectly perceive that their real wage rate has risen, which leads them to work more hours.
Correct Answer:
Verified
Correct Answer:
Verified
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