The quantity of labor supplied increases as the real wage rises because

Question

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As the real wage increases, the opportunity cost of leisure rises. This means that workers are willing to work more hours or enter the labor force if they believe the financial gain from doing so outweighs the cost of giving up their leisure time. Therefore, the quantity of labor supplied increases. Choice A is incorrect because the question is asking about real wages, not nominal wages. Choice B is incorrect because the opportunity cost of working actually decreases as the real wage increases. Choice C is incorrect because the question is asking about the relationship between the real wage and labor supply, not labor demand. Choice E is incorrect because there is no evidence to support the claim that labor force participation decreases as the real wage increases.

The Quantity of Labor Supplied Increases as the Real Wage