The Supply of Labour Bends Backward Because as the Wage

question 74

Multiple Choice

The supply of labour bends backward because as the wage rate becomes very high:

• A)the opportunity cost of leisure declines.
• B)the income effect becomes greater than the substitution effect.
• C)the substitution effect becomes greater than the income effect.
• D)the substitution effect and income effect work in the same direction.

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Definitions:

Marginal Product

The additional output that is produced by adding one more unit of a specific input, keeping all other inputs constant.

Profit-maximizing

A strategy or point where a firm or entity makes the highest possible profit under given market conditions.

Negative

Often used to describe a detrimental condition or decrease in quantity or quality in various contexts.

Real Wages

Wages that have been adjusted for inflation, representing the actual purchasing power of income.