Question 1

A backward bending labour supply curve indicates that&#10;A) Workers become lazy as they earn more money&#10;B) Leisure is a normal good&#10;C) The size of the income effect is greater than that of the substitution effect&#10;D) Increasing real wages mean that employers have to resort to short-time working.

Accepted Answer

A backward bending labour supply curve indicates that as wages increase, individuals may choose to work less and consume more leisure time. This suggests that leisure is a normal good. The income effect of a wage increase, which leads to an increase in demand for leisure, outweighs the substitution effect of a wage increase, which leads to a decrease in demand for leisure. This is why the curve bends backwards. The other choices are not accurate explanations of a backward bending curve.

Question 2

If an indifference curve measuring the relationship between wage income and leisure becomes steeper this must mean&#10;A) A worker places more value on wage income relative to leisure than formerly was the case&#10;B) The marginal utility of income has increased&#10;C) Hours of work have fallen&#10;D) The amount of time devoted to leisure must have decreased.

Accepted Answer

If the indifference curve becomes steeper, it means that the worker is willing to sacrifice more leisure time for each additional unit of wage income. This indicates that the worker places a higher value on wage income relative to leisure than previously.

Question 3

A non-linear budget constraint necessarily implies&#10;A) Other family income has risen&#10;B) Income tax has been raised&#10;C) Overtime premium payments have been reduced&#10;D) None of the above.

Accepted Answer

A non-linear budget constraint refers to a situation where the slope of the constraint changes at some point. It does not necessarily imply any of the given options, as it can be caused by various factors such as changes in prices or preferences.

Question 4

Some employers may prefer overtime payments plus a lower standard wage to a higher standard wage producing the same wage costs because&#10;A) This makes it easier to introduce short-time working in a recession&#10;B) In order to satisfy trade unions&#10;C) They wish to utilise the existing workforce more intensively&#10;D) The offer of overtime makes workers less likely to quit.

Accepted Answer

By offering overtime pay instead of a higher standard wage, employers can incentivize workers to work longer hours, increasing output and productivity without having to hire additional employees. This allows them to utilize their existing workforce more intensively and potentially save on labor costs.

Question 5

An income preferrer is an individual who&#10;A) wishes to receive a higher rate of pay for the same amount of hours worked&#10;B) would prefer to work more hours for the same amount of pay&#10;C) has large financial commitments outside of work&#10;D) is a member of a trade union.

Accepted Answer

An income preferrer is someone who would prefer to work more hours for the same amount of pay. This is different from someone who values their leisure time more and would prefer to work fewer hours for higher pay.

Question 6

Multiple job-holding can only occur when&#10;A) workers are bored in their main job&#10;B) there are constraints on the hours of work&#10;C) overtime is not available&#10;D) earnings in the main job are too low.

Accepted Answer

Multiple job-holding usually occurs when earnings in the main job are too low and workers need to supplement their income with a second job.

Question 7

The neo-classical theory of labour supply assumes that&#10;A) the individual is faced with a simple choice between leisure and goods&#10;B) the only source of income is income from work&#10;C) hours of work are not subject to a time constraint&#10;D) the substitution effect does not apply.

Accepted Answer

The neo-classical theory of labour supply assumes that the individual is faced with a simple choice between leisure and goods, which implies that the individual has a fixed amount of time and must allocate it between work and leisure. Option B is incorrect because the theory assumes that there are other sources of income, such as inheritance or interest on savings. Option C is incorrect because the theory assumes that hours of work are subject to a time constraint, as the individual only has a limited amount of time available. Option D is incorrect because the substitution effect does apply in the theory, meaning that individuals will substitute leisure for work as the wage rate increases, all else being equal.

Question 8

Absenteeism&#10;A) is positively related to the amount of sick-pay available&#10;B) is always inefficient&#10;C) results from the fact that single women absent themselves from work more than single men&#10;D) results from the fact that temporary employees have a higher propensity to be absent than full-time staff.

Accepted Answer

The availability of sick-pay has been found to be positively related to absenteeism. This is because employees may feel they can take advantage of the sick-pay benefit and are more likely to call in sick even if they are not actually ill.

Deck 2: The Labour Supply Curve