Wt NS N₂ Figure 1: Labor Supply Curve 3. Figure 1 (above) shows a theoretical labor supply curve. For wages below w, what is true about labor supply? (a) Labor supply is increasing with the wage (b) The income effect relatively dominates the substitution effect with respect to the wage (c) The substitution effect relatively dominates the wealth effect with respect to the wage (d) Labor supply is perfectly inelastic (e) Labor supply is perfectly elastic

ECON MICRO
5th Edition
ISBN:9781337000536
Author:William A. McEachern
Publisher:William A. McEachern
Chapter12: Labor Markets And Labor Unions
Section: Chapter Questions
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Wt
NS
N₂
Figure 1: Labor Supply Curve
3. Figure 1 (above) shows a theoretical labor supply curve. For wages below w, what is true about labor supply?
(a) Labor supply is increasing with the wage
(b) The income effect relatively dominates the substitution effect with respect to the wage
(c) The substitution effect relatively dominates the wealth effect with respect to the wage
(d) Labor supply is perfectly inelastic
(e) Labor supply is perfectly elastic
Transcribed Image Text:Wt NS N₂ Figure 1: Labor Supply Curve 3. Figure 1 (above) shows a theoretical labor supply curve. For wages below w, what is true about labor supply? (a) Labor supply is increasing with the wage (b) The income effect relatively dominates the substitution effect with respect to the wage (c) The substitution effect relatively dominates the wealth effect with respect to the wage (d) Labor supply is perfectly inelastic (e) Labor supply is perfectly elastic
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