Exam 35: Indifference Curve Analysis of Labor Supply

Use the following to answer questions Figure: Davina's Labor Supply Choice -(Figure: Davina's Labor Supply Choice) The figure Davina's Labor Supply Choice shows Davina's time allocation budget line when her hourly wage is $10 or $15 and she has 80 hours to allocate between labor and leisure; it also shows two of her indifference curves for income and leisure. Davina's labor supply curve is _____ as her hourly wage rises from $10 to $15.

Javon has 80 hours per week to allocate between labor and leisure. Javon's wage is $8 per hour. Graph 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:

Kaile earns $10 as a lab technician. She can work up to 60 hours per week but usually works 35 hours. She spends several hours every week reading in the park. She says she likes this because it is free. Kaile is right: sitting in the park with a book is costless.

An increase in the wage rate will:

Use the following to answer questions Figure: Davina's Labor Supply Choice -(Figure: Davina's Labor Supply Choice) The figure Davina's Labor Supply Choice shows Davina's time allocation budget line when her hourly wage is $10 or $15 and she has 80 hours to allocate between labor and leisure; it also shows two of her indifference curves for income and leisure. As Davina's hourly wage rises from $10 to $15:

Use the following to answer questions Figure: Rita's Time Allocation Budget Line -(Figure: Rita's Time Allocation Budget Line) Look at the figure Rita's Time Allocation Budget Line. It is based on 80 hours available for labor and leisure. If her hourly wage doubles, the new time allocation budget line will have a point at _____ hours of leisure and _____ in income.

If an individual's wage rate decreases, the substitution effect will cause the individual to work fewer hours.

If the labor supply curve bends backward, then the backward-bending portion reveals that _____ is a(n) _____ good and the _____ effect is greater than the _____ effect.

Use the following to answer questions Figure: Joanna's Time Allocation Budget Line -(Figure: Joanna's Time Allocation Budget Line) The figure Joanna's Time Allocation Budget Line depicts what happens when she can choose how to spend 40 hours. What is Joanna's wage rate?

Use the following to answer questions Figure: Joanna's Time Allocation Budget Line -(Figure: Joanna's Time Allocation Budget Line) The figure Joanna's Time Allocation Budget Line depicts what happens when she can choose how to spend 40 hours. What is the opportunity cost of an hour of leisure?

Javon has 80 hours per week to allocate between labor and leisure. Graph 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:

Use the following to answer questions Figure: The Time Allocation Budget Line -(Figure: The Time Allocation Budget Line) Look at the figure The Time Allocation Budget Line. If the wage rate decreases, then the time allocation budget line will rotate _____ along the _____ axis.

Diana's labor supply curve changes slope and begins to bend backward at a wage of $44. Thus, for a wage _____ $44, the substitution effect of a wage increase will _____.

Javon has 80 hours per week to allocate between labor and leisure. Graph 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:

Use the following to answer questions Figure: Joanna's Time Allocation Budget Line -(Figure: Joanna's Time Allocation Budget Line) Joanna's Time Allocation Budget Line depicts what happens when she can choose how to spend 40 hours. If Joanna's wage rate increases and she ends up working MORE hours:

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 value of an additional hour of leisure is:

The time allocation budget line shows an individual's _____ and the income that allows consumption of marketed goods.

An individual will allocate time between labor and leisure by finding the point at which:

Use the following to answer questions Figure: Rita's Time Allocation Budget Line -(Figure: Rita's Time Allocation Budget Line) Look at the figure Rita's Time Allocation Budget Line. It is based on 80 hours available for labor and leisure. Rita chooses 40 hours of leisure and income of $280. When her hourly wage doubles, Rita chooses 50 hours of leisure and income of $420. The substitution effect is making her work _____, the income effect is making her work _____, and the substitution effect is _____ than the income effect.

Javon has 80 hours per week to allocate between labor and leisure. Graph 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: