The figure given below shows a backward-bending labor supply curve for an individual. In the figure below, which of the following is true at a wage rate of $20?
Figure 12.2

Question

The figure given below shows a backward-bending labor supply curve for an individual. In the figure below, which of the following is true at a wage rate of $20? ​
Figure 12.2
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Quizplus · Accepted Answer

At a wage rate of $20, the individual is already earning a relatively high income. Therefore, the income effect, which causes the individual to work less as income increases, dominates the substitution effect, which causes the individual to work more as the wage rate increases. This is reflected by the fact that the labor supply curve bends backward at this wage rate. Therefore, the correct answer is A.

The Figure Given Below Shows a Backward-Bending Labor Supply Curve