What determines the amount of labor that households plan to supply?
What will be an ideal response?
When households decide how much labor to provide in the labor market, they compare the market wage rate to the value of the lost leisure that supplying labor would entail. If the market wage rate exceeds the individual's reservation wage rate, the individual forgoes leisure and supplies labor to the labor market. The quantity of labor the person supplies depends on the wage rate. At most wage rates the substitution effect dominates the income effect so that a person increases the quantity of labor supplied if the wage rate rises. But at high wage rates the income effect dominates the substitution effect so that a person decreases the quantity of labor supplied if the wage rate increases.
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To find the opportunity cost of producing one more unit of any product while on the production possibilities frontier requires
A) subtracting the change in the product whose production increased from the change in the product whose production decreased. B) dividing the amount of the product forgone by the amount of the product gained. C) setting the amounts of the two products equal to each other. D) setting the change in one product equal to the change in the other product. E) None of these describes how to find opportunity cost.
The marginal cost curve is U-shaped because of the law of increasing opportunity costs
Indicate whether the statement is true or false