Question

11. In your later studies in economics, you will Supply Curve of Labour learn that supply curves for labour can be "backward bending" (that is, can be negatively sloped if a rise in the wage rate leads workers to want to work less in order to take more vacations and more leisure time). Such a supply curve is represented at the right, where w is the wage rate per hour and L is the number of hours of labour. The demand curve for labour (representing the number of hours of labour demanded by firms which hire these workers) can be assumed to be downward sloping, as usual in this course. Which of the following statements about the stability of this situation is (are) generally true? 1) This labour market will be stable if the demand curve is flatter than the supply curve. In This labour market is inherently unstable. III) This labour market will be stable if a rise in wages Icads to excess supply of hours of work. A) only! B) only II C) only III DI & II (E) & III F) II & III G) I, II & III ) none of the three L