How does the​ labor-leisure trade-off determine the supply of​ labor? A. The supply of labor is no different than the supply of any other good or service in that it is primarily affected by production costs. In the case of​ labor, the dominant production cost is the cost incurred to acquire employable skills. The supply of labor is​ upward-sloping because higher wages are required to cover the expense of gaining more skills. B. An increase in the wage rate is an increase in the opportunity cost of​ leisure, and can therefore be expected to reduce the amount of leisure one wishes to consume. Choosing less leisure is equivalent to supplying more​ labor, thus yielding a positive relationship between the wage rate and the amount of labor supplied. C. Individuals typically trade off working versus leisure in an​ unplanned, unsystematic way. As a​ result, the supply of labor exhibits a bit of​ randomness, showing that higher wages sometimes increase the quantity of labor time supplied and sometimes decrease the quantity of labor time supplied. D. When an individual chooses an amount of leisure to​ consume, he is simultaneously choosing a quantity of labor to supply. Since leisure is a normal​ good, an increase in the wage induces more consumption of leisure and therefore a smaller quantity of labor supplied.

B

Explanation:

Because wants are unlimited and the resources available to satisfy these wants are limited, economic agents must undergo trade-off

Trade-off is the opportunity cost of taking a particular decision

Opportunity cost of the next best option forgone when one alternative is chosen over other alternatives

According to the law of supply, if wage rate increases the supply of labour would increase. If wage rate increases, the number of hours that labour would want to work would increase. Thus, there is a positive relationship between wage rate and labour supply. The supply curve for labour is positively sloped. Because time is finite, as the number of hours labour works increases, labour would have less time for leisure.

rational decision making is a multi-step process for making choices between alternatives. the process of rational decision making favors logic, objectivity, and analysis over subjectivity and insight. the word “rational” in this context does not mean sane or clear-headed as it does in the colloquial sense.

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