Contemporary Labor Economics 9th Edition by Campbell Mcconnell, Stanley Brue, David Macpherson, Robert Powell, David Colander

Exercise 3

Suppose Lauren is given two options by her employer. First option: She may choose her own hours of work and will be paid the relatively low wage rate implied by budget line HW₁ shown in the accompanying diagram. Second option: She can work exactly HR hours and will be paid the relatively high wage rate implied by budget line HW₂. Which option will she choose Justify your answer.