In Order for There to Be a Backward-Bending Supply of Labor

question 36

Multiple Choice

In order for there to be a backward-bending supply of labor curve, it must be the case that

• A) at low wage rates, the income effect of a wage increase exceeds the substitution effect, but at high wage rates the substitution effect of a wage increase exceeds the income effect.
• B) at low wage rates, the substitution effect of a wage increase exceeds the income effect, but at high wage rates the income effect of a wage increase exceeds the substitution effect.
• C) the income effect of a wage increase exceeds the substitution effect at all wage rates.
• D) the substitution effect of a wage increase exceeds the income effect at all wage rates.

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Definitions:

Transformation Process

The series of actions taken to convert inputs (resources) into outputs (products or services) in business or manufacturing environments.

Feedback Loop

A feedback loop is a process in which the outcomes of a system are circled back and used as inputs for future actions, allowing for continual adjustment and improvement.

External Environment

The conditions, entities, events, and factors surrounding an organization that influence its activities and choices, such as economic conditions, competitors, and regulations.

Resource Inputs

The materials, labor, and capital that are invested into a system or process to produce goods or services.