If a Firm Offers to Pay a Worker $10 for Each

question 145

Multiple Choice

If a firm offers to pay a worker $10 for each hour of leisure the worker gives up,the $10 implies the:

• A) marginal rate of substitution between leisure and income.
• B) market rate of substitution between leisure and income.
• C) market rate of transformation between leisure and income.
• D) marginal rate of transformation between leisure and income.

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Definitions:

Expansion Path

In economics, the curve that shows how a firm's production changes as it increases inputs, keeping the input mix proportionate.

Marginal Product

The additional output obtained by employing one more unit of a specific input, keeping all other inputs constant.

Perfect Substitutes

Two goods for which the marginal rate of substitution of one for the other is a constant.

Labor Costs

The total sum of all wages, benefits, and taxes that businesses must pay for employing workers.