John Is Trying to Decide How to Divide His Time

question 90

Multiple Choice

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Hours Per } \\\text { Day Cleaning } \\\text { Windows }\end{array} & \begin{array} { c } \text { Total Number } \\\text { of Windows } \\\text { Cleaned }\end{array} \\\hline 0 & 0 \\\hline 1 & 7 \\\hline 2 & 11 \\\hline 3 & 14 \\\hline 4 & 16 \\\hline 5 & 17 \\\hline\end{array}$$ Should John spend a third hour cleaning windows?

• A)Yes, because he would earn $28.
• B)Yes, because the additional amount he would earn is $14, which is greater than his opportunity cost of $7.
• C)No, because the additional amount he would earn is $6, which is less than his opportunity cost of $7.
• D)Yes, because the additional amount he would earn is $6, which is better than earning nothing.

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Definitions:

U.S. Treasury Department

The federal department responsible for managing government revenue, producing money, and formulating fiscal policy in the United States.

Outstanding Shares

The total number of shares of a corporation's stock that are currently owned by all its shareholders, including share blocks held by institutional investors and restricted shares.

Issued Shares

Shares of a company that have been allocated and are currently held by shareholders.

Common Stock

Shares representing ownership in a company, giving holders voting rights and a share in the company's profits via dividends.