Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
As marginal returns decrease, the labor supply increases due to higher income.
B
As marginal returns increase, the labor supply decreases because workers can earn more without working additional hours.
C
The income effect suggests that as wages increase, workers may choose to work fewer hours due to increased income, regardless of marginal returns.
D
There is no relationship between marginal returns and the labor supply influenced by the income effect.
Understanding the Answer
Let's break down why this is correct
Answer
The concept of marginal returns refers to the additional output produced when one more unit of labor is added. When workers put in extra hours, the returns they get from their work can change. If the extra income from working more hours leads to a higher overall income, workers might decide to supply less labor because they can afford to enjoy more leisure time, which is known as the income effect. For example, if a person finds that working extra hours brings in enough money to cover their needs, they might choose to work fewer hours to spend more time with family or on hobbies. This shows how the income effect can reduce the amount of labor supplied even if the marginal returns from working more hours are still positive.
Detailed Explanation
When wages go up, workers feel richer. Other options are incorrect because This answer suggests that lower returns mean more work; This option says that higher returns lead to less work.
Key Concepts
Marginal returns
Income effect
Topic
Marginal Returns and Labor Supply
Difficulty
medium level question
Cognitive Level
understand
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