If the income effect dominates the substitution effect, the labor supply curve will be backward-bending.
Answer the following statement true (T) or false (F)
True
The increased income made possible by higher wage rates might permit a worker to work fewer hours. These negative labor supply responses to increased wage rates are referred to as the income effect of a wage increase and will cause the labor supply curve to bend backward.
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Refer to the Article Summary. The article discusses the rising administrative costs of health care
Even if private insurance companies were more efficient and brought administrative costs down, consumers would still pay less than the full cost of medical treatment. This would result in the market equilibrium price of medical services being ________ than the efficient equilibrium price, and the market equilibrium quantity of medical services being ________ than the efficient equilibrium quantity. A) less; less B) greater; less C) less; greater D) greater; greater
In the above figure, assume the economy is in equilibrium at point d. Then the Fed decreases the money supply so that the new aggregate demand curve is AD1. In the long run, the new price level will be
A) 100. B) 120. C) 130. D) 110.