An Individual's Supply Curve of Labor Is Backward Bending When

question 57

Multiple Choice

An individual's supply curve of labor is backward bending when:

• A)the income effect dominates at lower wage rates and the substitution effect dominates at higher wage rates.
• B)the substitution effect dominates at lower wage rates and the income effect dominates at higher wage rates.
• C)the substitution and income effect work in the same direction at lower wage rates but in opposite directions at higher wage rates.
• D)the substitution and income effect offset each other at lower wage rates but work in opposite directions at higher wage rates.

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Definitions:

Marginal Product

The additional output resulting from the use of one more unit of a particular input, holding other inputs constant.

Total Product

The total output produced by a firm or within an economy.

Average Product

The output per unit of input, such as the quantity of goods produced per worker.

Law Of Diminishing Returns

The principle that as successive increments of a variable resource are added to a fixed resource, the marginal product of the variable resource will eventually decrease.