If an individual labor supply curve bends backward at some high wage, so does the market labor supply curve.
True
False
The correct answer and explanation is:
The correct answer is False.
Explanation: The backward-bending individual labor supply curve implies that as the wage rate increases beyond a certain point, the individual may choose to work fewer hours rather than more. This happens because at higher wages, the individual may prefer leisure time over additional income, as their income goals can be reached with less labor.
However, this does not mean the market labor supply curve will necessarily bend backward at the same wage level. The market labor supply curve is the aggregate of all individual labor supply curves in the economy, and it reflects the combined behavior of all workers in the labor force. While some individuals might reduce their hours as wages rise, others may increase their labor supply in response to higher wages. For example, workers who are not yet at their desired income levels may choose to work more hours when wages increase.
Therefore, even if some individuals’ labor supply curves bend backward, the market labor supply curve could still slope upward, especially if the increase in labor supply from other individuals outweighs the decrease from those who are working less. The market labor supply curve represents the sum of the labor supply decisions made by all individuals, and it is more influenced by the overall labor force’s responsiveness to wages, which varies across different workers.
In summary, while some individual labor supply curves may bend backward at high wages, this does not imply that the market labor supply curve will necessarily do so. The behavior of the market labor supply curve is determined by the aggregate choices of all individuals in the economy, and these choices may not follow the same pattern as those of individual workers.