Question 1 1 pts If the wage falls, the substitution effect will cause hours wor

Question

Question 1 1 pts If the wage falls, the substitution effect will cause hours worked to increase hours of leisure to decrease O Ambiguous, theory cannot predict if hours will increase or decrease. hours worked to decrease Question 2 1 pts Suppose someone is laid off and begins to receive unemployment insurance (equal to their previous wages). After a short period, their old firm offers them back their job at the old wages. According to economic theory (in which people derive utility from income and leisure) the person is likely to O either accept or turn down, depending on whether the income or substitution effect dominates. O turn down the job offer O accept the job offer because they value work. Question 3 1 pts Economic theory predicts the labor supply curve slopes is vertical O down. Ul O either up, down or vertical. Theory cannot determine

Explanation / Answer

1. Option D.

2.option b.

3. Option D.

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