Question

B is wrong.

TB 16-80 Julie works at a local hat factory for $12 a... Julie works at a local hat factory for $12 an hour and typically works 40 hours a week. The company threatens layoffs, so Julie and the others agree to a pay cut. Julie now earns $10 an hour and works every hour over 40 that her boss will let her. Julie's response to this pay cut: O was to work more, demonstrating a dominant income effect. was to work more, demonstrating a dominant price effect. O was to work less, demonstrating a dominant income effect. O was to work less, demonstrating a dominant price effect.

Answer 1

Answer ; option A)

since wage cut has two effects

1) income effect : as income falls, so work more to compensate for the loss

2) Substitution effect, work less,

Price effect. = income effect + Substitution effect

So income effect is dominant, so that work hours rise , after wage cut