The Typical Labor Supply Curve Is Upward Sloping but It

question 253

Multiple Choice

The typical labor supply curve is upward sloping but it is possible for the curve to be backward bending -negatively sloped-at very high wage levels.Which of the following would cause a backward-bending supply curve?

• A)This would occur when the income effect from an increase in the wage becomes larger than the substitution effect.
• B)This would occur when the substitution effect from an increase in the wage becomes larger than the income effect.
• C)This would occur if leisure is an inferior good.
• D)This would occur when a large number of workers choose leisure rather than employment at low wages; only a very large increase in the wage will lead these workers to prefer employment to leisure.

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Definitions:

Profits Increase

An upward movement in the net financial gains of a business, often resulting from increased revenue, reduced costs, or both.

Profits Decrease

The reduction in earnings, often due to increased costs, lower sales, or unfavorable market conditions.

Quick Response

A strategy focused on reducing lead times across the supply chain to respond swiftly to consumer demand and market changes.

Product Differentiation

The process of distinguishing a product or service from others in the market to make it more attractive to a particular target market.