b . results in a substitution effect that always decreases hours worked per year . c . results in an income effect that increases hours worked per year if leisure is a normal good .
d . both ( a ) and ( b ) e . both ( b ) and ( c ) 3 . The market supply of labor is perfectly inelastic . Then it follows that : a . the substitution effect of wage changes is zero . b . the income effect of wage changes is zero . c . leisure is a normal good and the income effect of wage changes exactly offsets the substitution effect .
d . the excess burden of a tax on labor income will be zero . 4 . The compensated labor supply curve : a . will always be vertical . b . will always be upward sloping . c . will always be downward sloping . d . reflects both the income and substitution effects of wage changes .
5 . Using a regular labor supply curve instead of a compensated supply curve to calculate the excess burden of a tax on labor income will :
a . result in an accurate estimate of the excess burden . b . overestimate the excess burden . c . underestimate the excess burden .