868 869 870 871 Dorothy is trying to decide how to allocate her time between work and leisure Suppose that she can work a maximum of 75 hours per week If she can earn 15 per hour the vertical intercept of her time allocation budget line with income plotted vertically and leisure plotted horizontally is 15 Incorrect 75 hours Incorrect 5 Incorrect 1 125 True Answer Correct Consider the time allocation budget line for Priya Put hours of leisure on the horizontal axis and income on the vertical axis If Priya can allocate 100 hours per week to either leisure or work and her wage per hour is 18 then the vertical intercept is and the slope of the time allocation budget line is 180 18 Incorrect 1 800 18 Incorrect 1 800 18 True Answer Correct 720 18 Incorrect Miss Marple spends her entire leisure time gardening She values the marginal utility of the last hour spent gardening at 17 She could earn 20 if she worked an additional hour Assuming that Miss Marple wants to maximize her utility which of the following is correct She should spend more time gardening and less time working since one needs to balance the stress of work with the relaxation provided by a hobby Incorrect She should spend more time gardening and less time working since leisure activities are usually characterized by increasing marginal utility Incorrect She should reallocate her time away from gardening and toward more work True Answer Correct This question cannot be answered without knowing how many hours she spends working and how many hours she spends gardening Incorrect Kurt earns a wage of 100 per hour Jim earns a wage of 10 per hour To maximize utility Kurt works 45 hours per week and Jim works 50 hours per week The equilibrium value of an additional hour of leisure is higher for Jim than for Kurt Incorrect higher for Kurt than for Jim True Answer Correct less than 100 for Kurt Incorrect greater than 10 for Jim Incorrect 872 The time allocation budget line shows an individual s preferences for leisure and the income that allows consumption of marketed goods Incorrect trade offs between the consumption of leisure and the income that allows consumption of marketed goods True Answer Correct labor supply for the consumption of leisure and the income that allows consumption of marketed goods Incorrect indifference between the consumption of leisure and the income that allows consumption of marketed goods Incorrect Javon has 80 hours per week to allocate between labor and leisure Measure hours of leisure per week on the horizontal axis and income per week on the vertical axis If Javon s hourly wage is 8 then the vertical intercept of his time allocation budget line is 8 Incorrect 640 True Answer Correct 40 hours Incorrect 80 hours Incorrect Javon has 80 hours per week to allocate between labor and leisure Measure hours of leisure per week on the horizontal axis and income per week on the vertical axis If Javon s hourly wage is 8 then the horizontal intercept of his time allocation budget line is 8 Incorrect 640 Incorrect 40 hours Incorrect 80 hours True Answer Correct Javon has 80 hours per week to allocate between labor and leisure Measure hours of leisure per week on the horizontal axis and income per week on the vertical axis If Javon s hourly wage is 8 then the opportunity cost of an hour of leisure is 8 True Answer Correct 10 Incorrect 873 874 875 876 640 Incorrect 800 Incorrect Javon has 80 hours per week to allocate between labor and leisure Measure hours of leisure per week on the horizontal axis and income per week on the vertical axis According to the optimal time allocation rule Javon should allocate his time such that the marginal utility of an additional hour of leisure is 8 True Answer Correct 10 Incorrect 640 Incorrect 800 Incorrect 877 Figure The Time Allocation Budget Line Reference Ref 19 1 Figure The Time Allocation Budget Line In the figure The Time Allocation Budget Line if the wage rate rises then the time allocation budget line will rotate left along the leisure axis Incorrect up along the income axis True Answer Correct right along the leisure axis Incorrect down along the income axis Incorrect Figure The Time Allocation Budget Line 878 879 880 Reference Ref 19 1 Figure The Time Allocation Budget Line In the figure The Time Allocation Budget Line if the wage rate decreases then the time allocation budget line will rotate left along the leisure axis Incorrect up along the income axis Incorrect right along the leisure axis Incorrect down along the income axis True Answer Correct During the holiday season some people take a second job or work more hours From this we know that the income effect becomes more powerful than the substitution effect during the holiday season Incorrect the substitution effect becomes more powerful than the income effect during the holiday season True Answer Correct the income and substitution effects cancel each other out during the holiday season Incorrect people want to spend more time with their family during the holiday season Incorrect Diana s labor supply curve changes slope and begins to bend backward at a wage of 44 Thus for a wage above 44 the substitution effect of a wage increase will cause Diana to work fewer hours Incorrect below 44 the substitution effect of a wage increase will cause Diana to work fewer hours Incorrect below 44 the substitution effect of an increase in the wage dominates the income effect True Answer Correct above 44 the substitution effect of a wage increase will cause Diana to work more hours Incorrect 881 882 883 884 885 If the labor supply curve bends backward then the backward bending portion reveals that labor is a normal good and the income effect is greater than the substitution effect Incorrect labor is an inferior good and the substitution effect is greater than the income effect Incorrect leisure is a normal good and the income effect is greater than the substitution effect True Answer Correct leisure is an inferior good and the substitution effect is greater than the income effect Incorrect If an individual s labor supply curve is upward sloping at low wage rates and downward sloping at high wage rates then at higher wage rates there is no substitution effect as wages change Incorrect there is no income effect as wages change Incorrect the income effect dominates the substitution effect True Answer Correct the substitution effect dominates the income effect Incorrect An increase in the wage rate will normally generate a small
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