Dr J Has 80 Hours Per Week to Divide Between

question 26

Multiple Choice

Dr. J has 80 hours per week to divide between work and leisure. His wage rate if $5 per hour. Dr. J receives a lump sum payment of $250 per week. Suppose that the first $50 per week of his labor income is untaxed, but all labor income above $50 is taxed at a rate of 10%.

• A) The slope of Dr. J's budget line is everywhere -4.50.
• B) Dr. J's budget line has a kink where his income is $300 and his leisure is 70 hours.
• C) Dr. J's budget line has no kinks in the part of it that corresponds to a positive labor supply.
• D) Dr. J's budget line has a kink in it at the point where he takes 80 units of leisure.
• E) Dr. J's budget line has a piece that is a horizontal straight line.

---

Definitions:

Dividend

A portion of a company's earnings distributed to shareholders, usually in the form of cash or additional shares.

Formation of Corporation

The process of legally establishing a business as a corporation, which involves filing necessary documents with a government entity and adhering to the required regulatory procedures.

Basis

In taxation, refers to the value used to determine profit or loss for tax purposes when property is sold.

Property Contributed

refers to assets or properties given to an entity, such as a charity or a business, by an individual or another entity.