Assume That the Substitution Effect Dominates the Income Effect

Multiple Choice

Assume that the substitution effect dominates the income effect. When the government raises tax rates, after-tax real wage rates

A) fall, consumption decreases, and labor supply increases.
B) fall, consumption decreases, and labor supply decreases.
C) rise, consumption increases, and labor supply increases.
D) fall, consumption increases, and labor supply decreases.