Figure 34.2 illustrates two labor supply curves.If in-kind payments become less available in this economy and marginal tax rates decrease significantly, we would expect a shift from

Question

Quizplus · Accepted Answer

If in-kind payments become less available and marginal tax rates decrease significantly, individuals will have less income to spend on leisure and therefore may choose to increase their labor supply. This would result in a shift from S₁ to S₂. Additionally, a decrease in marginal tax rates would increase the net wage rate individuals receive, incentivizing them to work more, resulting in a movement up S_2.. Therefore, both the shift and the movement up would occur simultaneously, leading to answer choice B. Option A and C are incorrect as they only consider one of the changes and do not take into account the other. Option D is incorrect as it refers to a shift in the labor supply curve for a different reason.

Figure 342 Illustrates Two Labor Supply Curves