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Suppose that there are no taxes and no profits and that the M R S ℓ...

Suppose that there are no taxes and no profits and that the LaTeX: MRS_{\ell,c}=\frac{c}{\ell} M R S ℓ , c = c ℓ, then the optimal supply of labor is

  

a.inelastic

b.equal to zero

c.increasing in wages

d.decreasing in wages

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Answer #1

a) As there are no profits and no taxes,then the optimal supply of labour or the marginal rate of substitution will be inelastic.

increase or decrease in wages depends on hours of work that labor has performed.

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