Wage rate (dollars per hour) LS 90 80 70 60 50 40 30 20 10 0 20 30 4050 Quantity

Question

Wage rate (dollars per hour) LS 90 80 70 60 50 40 30 20 10 0 20 30 4050 Quantity of labor (hours per weck) Peyton is a personal trainer and works at several gyms in her neighborhood. Peyton's labor supply curve is shown above. Which of the following statements is true regarding Peyton's labor supply? . Peyton is willing to supply more labor and give up leisure at wages between $50 and $75 per hour. ii. Peyton will not work for less than $30 per hour. ii. If the wage increases higher than $75 per hour, Peyton will choose to take more leisure. O ii only O I, li and ili O i and ii lill only O il and ili

Explanation / Answer

Option (2).

Between wage rates of $50 and $75, labor supply curve is upward rising, so people work more and leisure less as wage rises. Vertical intercept of LS curve is $30, so this is the minimum acceptable wage. Beyond wage of $75, LS is backward bending, so higher wage will make Peyton to work less and leisure more.

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