If an individual's labor supply curve is backward bending, then ...

[jerry coleman]

If an individual's labor supply curve is backward bending, then
 
  A) the income effect associated with a higher wage is greater than the substitution effect.
  B) the substitution effect associated with a higher wage is greater than the income effect.
  C) the substitution effect associated with a higher wage encourages more leisure.
  D) A and C
  E) B and C

Question 2

What characteristic of monopolistic competition may help to offset the inefficiency of this market structure?
 
  A) Free entry and exit imply that firms produce at minimum long-run average cost.
  B) Consumers may value the product diversity that allows them to choose from a wide variety of differentiated products.
  C) Consumers may feel better about the inefficiency if they know that firms earn zero profits.
  D) Consumers may prefer this outcome to monopoly or monopsony.

[Brenm]

Answer to Question 1

A

Answer to Question 2

B