Mr Cog in Problem 7 Has 18 Hours a Day

question 22

Multiple Choice

Mr. Cog in Problem 7 has 18 hours a day to divide between labor and leisure. If he has 13 dollars of nonlabor income per day and gets a wage rate of 17 dollars per hour when he works, his budget equation, expressing combinations of consumption and leisure that he can afford to have, can be written as

• A) 17R + C = 13.
• B) 17R + C = 319.
• C) R += 421.
• D) C = 319 + 17R.
• E) C = 358 + 17R.

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Definitions:

Myopia

Short-sightedness, either literally in terms of vision or metaphorically in planning or decision-making.

Behavioral Economics

A field of study that analyzes the effects of psychological, cognitive, emotional, cultural, and social factors on the economic decisions of individuals and institutions, and the consequences for market prices, returns, and resource allocation.

Time Inconsistency

The tendency of individuals to change their plans about future actions due to a preference for immediate gratification over future benefit, often leading to inconsistency over time.

Precommitment

A strategy or decision made in advance to lock oneself into a set of actions or behaviors, often to avoid temptation or to ensure future goals are met.