Refer to the information provided in Figure 2.4 below to answer the question(s) that follow. Figure 2.4According to Figure 2.4, an increase in unemployment may be represented by the movement from

In labor markets, a change in the wage rate has both an income and a substitution effect. An increase in wages causes an increase in real income but at the same time it increases the relative price of leisure for the worker. If an increase in wage rate causes an individual to work less, _____

a. the income effect dominates the substitution effect b. the substitution effect dominates the income effect c. the substitution and income effects cancel each other out d. then leisure will be referred to as an inferior good e. the increase in wage rates will cause an increase in the supply of labor

In long-run equilibrium in a monopolistically competitive market, firms typically: a. earn a normal profit

b. charge a price equal to marginal cost. c. earn an above-normal profit. d. charge a price equal to marginal revenue.