If a worker responds to an increase in the opportunity cost of leisure by taking more leisure, then her labor supply curve is
A)upward sloping.
B)backward sloping.
C)horizontal.
D)vertical.

Question

Quizplus · Accepted Answer

According to the law of demand, the quantity demanded of a good or service decreases as the price of that good or service increases. Similarly, as the opportunity cost of leisure increases, the quantity supplied of labor (i.e., the amount of time a worker is willing to work) should also increase. Therefore, the labor supply curve should be upward sloping. However, if a worker responds to an increase in the opportunity cost of leisure by taking more leisure, then her labor supply curve actually slopes backward (i.e., it is upward sloping at low wages and downward sloping at high wages). This occurs because at low wages, the worker is not earning enough to make it worthwhile to work more and thus will choose more leisure. At high wages, the worker is earning enough to make it worthwhile to work more and thus will choose less leisure.

If a Worker Responds to an Increase in the Opportunity