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(A) True or False, and explain! (30%) 1. It is impossible to explain why workers have the same productivity have different wa

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Answer #1

1.

True

It is impossible to explain why workers have same productivity have different wages in frictionless labour market. Under frictionless labour market individual may control his labour supply decision and he cant control his employment outcome.

2. False

If person decreases working hours when his or her wage increases. It results in backward bending individual labour supply curve because individual may substitute leisure for working hours.

3. False

If labour market has only onee buyer of labour , it can be termed as monopsonist.Monopsonists can influence the price compared with buyers in more competitive markets.

4. True

The reservation wage is the lowest wage at which workers are willing to work. Reservation wage of unemployed worker is zero.

5. True

Increase in the wage rate will rotate the budget line more outward. Individual can work more hours and receive a higher wage

6. True

If an individual values leisure more than income . The income-leisure indifference becomes more flatter. More flatter Income-leisure indifference curve indicates more leisure when giving up income.

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