DrJ Has 80 Hours Per Week to Divide Between Work

question 17

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 $150 per week of his labor income is untaxed, but all labor income above $150 is taxed at a rate of 70%.

• A)Dr.J's budget line has a kink where his income is $400 and his leisure is 50 hours.
• B)The slope of Dr.J's budget line is everywhere -1.50.
• C)Dr.J's budget line has a kink in it at the point where he takes 60 units of leisure.
• D)Dr.J's budget line has no kinks in the part of it that corresponds to a positive labor supply.
• E)Dr.J's budget line has a piece that is a horizontal straight line.

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Definitions:

Rational Choice Paradigm

A theory suggesting that individuals always make prudent and logical decisions that provide them with the highest amount of personal utility.

Effective Decision Makers

Individuals who are able to make choices by identifying and choosing the best alternatives based on the values and preferences of the decision maker.

Unconscious Process

Psychological activities within an individual that occur without their conscious awareness, influencing thoughts, feelings, and behaviors.

Desirable State

A condition or situation that is regarded as preferable or ideal by an individual or group.