Question 16 (3 points) Assume that a Cobb-Douglas production function is a good representation of the economy, the substitution effect is stronger than the income effect, the real wage is flexible, and that the economy was initially at equilibrium. Suppose that an earthquake hits the economy, destroying a large number of homes and manufacturing factories (including machines within the factories) but not causing any deaths or injuries in the population. If the real wage is completely flexible, what will happen to the equilibrium real wage rate and quantity of labor? The equilibrium real wage rate will increase and equilibrium quantity of labor will increase O The equilibrium real wage rate will decrease and the equilibrium quantity of labor will increase The equilibrium real wage rate will decrease and equilibrium quantity of labor will decrease O The equilibrium real wage rate will increase and the equilibrium quantity of labor will decrease