Question

The supply of labour function is upward sloping because as the real wage rate increases:

(i) the opportunity cost of working increases.

(ii) the opportunity cost of leisure increases.

(iii) diminishing marginal product of labour occurs.

• Only (i) and (iii) are correct.

• Only (i) is correct.

• Only (ii) and (iii) are correct.

• Only (ii) is correct.

Answer 1

• the opportunity cost of leisure increases. Therefore Only (ii) is correct.