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Test Canvas : TestBanks Chapter 19 Appendix: Indifference Curve Analysis of
Labor Supply
Microeconom ics, 3e
Test Canvas: TestBanks Chapter 19 Appendix: Indifference Curve
Analysis of Labor Supply
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1. True/False: To maximize utility, an individual sh...
Question To maximize utility, an individual should allocate his or her time so that the
marginal utility from the earnings from an hour spent working is equal to the
marginal utility of an additional hour of leisure.
2. True/False: Kaile earns $10 as a lab tech. She ca...
Question Kaile earns $10 as a lab tech. She can work up to 60 hours per week but usually
works 35 hours. She spends several hours every week reading in the park. She
says she likes this because it is free. Kaile is right: sitting in the park with a book
is costless.
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3. True/False: If an individual’s wage rate decrease…
Question If an individual‘s wage rate decreases, the substitution effect will cause the
individual to work fewer hours.
4. True/False: If leisure is a normal good for Randy…
Question If leisure is a normal good for Randy, then both the substitution effect and the
income effect of a decrease in the wage rate will cause Randy to work fewer hours.
5. True/False: While individual labor supply curves ...
Question While individual labor supply curves may bend backward, market labor supply
curves are likely to be upward sloping throughout, since higher wages induce new
workers to enter the labor market.
6. Multiple Choice: Dorothy is trying to decide how to al...
Question Dorothy is trying to decide how to allocate her time between work and leisure.
Suppose that she can work a maximum of 75 hours per week. If she can earn $15
per hour, the vertical intercept of her time allocation budget line (with income
plotted vertically and leisure plotted horizontally) is:
7. Multiple Choice: Consider the time allocation budget l...
Question Consider the time allocation budget line for Priya. Put hours of leisure on the
horizontal axis and income on the vertical axis. If Priya can allocate 100 hours per
week to either leisure or work and her wage per hour is $18, then the vertical
intercept is ________ and the slope of the time allocation budget line is ________.
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8. Multiple Choice: Miss Marple spends her entire leisure…
Question Miss Marple spends her entire leisure time gardening. She values the marginal
utility of the last hour spent gardening at $17. She could earn $20 if she worked an
additional hour. Assuming that Miss Marple wants to maximize her utility, which of
the following is correct?
9. Multiple Choice: Kurt earns a wage of $100 per hour; J…
Question Kurt earns a wage of $100 per hour; Jim earns a wage of $10 per hour. To
maximize utility, Kurt works 45 hours per week and Jim works 50 hours per week.
The equilibrium value of an additional hour of leisure is:
10. Multiple Choice: The time allocation budget line shows…
Question The time allocation budget line shows an individual’s:
Answer preferences for leisure and the income that allows consumption of marketed
goods.
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11. Multiple Choice: Javon has 80 hours per week to alloca…
Question Javon has 80 hours per week to allocate between labor and leisure. Measure hours
of leisure per week on the horizontal axis and income per week on the vertical axis.
If Javon‘s hourly wage is $8, then the vertical intercept of his time allocation budget
line is:
12. Multiple Choice: Javon has 80 hours per week to alloca…
Question Javon has 80 hours per week to allocate between labor and leisure. Measure hours
of leisure per week on the horizontal axis and income per week on the vertical axis.
If Javon‘s hourly wage is $8, then the horizontal intercept of his time allocation
budget line is:
13. Multiple Choice: Javon has 80 hours per week to alloca…
Question Javon has 80 hours per week to allocate between labor and leisure. Measure hours
of leisure per week on the horizontal axis and income per week on the vertical axis.
If Javon‘s hourly wage is $8, then the opportunity cost of an hour of leisure is:
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14. Multiple Choice: Javon has 80 hours per week to alloca…
Question Javon has 80 hours per week to allocate between labor and leisure. Measure hours
of leisure per week on the horizontal axis and income per week on the vertical axis.
According to the optimal time allocation rule, Javon should allocate his time such
that the marginal utility of an additional hour of leisure is:
15. Multiple Choice: Figure: The Time Allocation Budget Li…
Question Figure: The Time Allocation Budget Line
Reference: Ref 19-1
(Figure: The Time Allocation Budget Line) In the figure The Time Allocation Budget
Line, if the wage rate rises, then the time allocation budget line will rotate:
Answer left along the leisure axis.
16. Multiple Choice: Figure: The Time Allocation Budget Li…
Question
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Figure: The Time Allocation Budget Line
Reference: Ref 19-1
(Figure: The Time Allocation Budget Line) In the figure The Time Allocation Budget
Line, if the wage rate decreases, then the time allocation budget line will rotate:
Answer left along the leisure axis.
17. Multiple Choice: During the holiday season some people…
Question During the holiday season some people take a second job or work more hours.
From this we know that:
Answer the income effect becomes more powerful than the substitution effect during
the holiday season.
18. Multiple Choice: Diana‘s labor supply curve changes sl...
Question Diana‘s labor supply curve changes slope and begins to bend backward at a wage
of $44. Thus, for a wage:
Answer above $44, the substitution effect of a wage increase will cause Diana to work
fewer hours.
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19. Multiple Choice: If the labor supply curve bends backw…
Question If the labor supply curve bends backward, then the backward-bending portion
reveals that:
20. Multiple Choice: If an individual’s labor supply curve…
Question If an individual‘s labor supply curve is upward sloping at low wage rates and
downward sloping at high wage rates, then at higher wage rates:
21. Multiple Choice: An increase in the wage rate will:
Question An increase in the wage rate will:
Answer normally generate a small income effect.
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22. Multiple Choice: An individual will allocate time betw…
Question An individual will allocate time between labor and leisure by finding the point at
which:
23. Multiple Choice: Assume Alex is maximizing utility by ...
Question Assume Alex is maximizing utility by working 51 hours per week and his wage is
$15 per hour. Which of the following statements is correct?
24. Multiple Choice: Figure: Income and Leisure Opportunit...
Question
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Figure: Income and Leisure Opportunities
Reference: Ref 19-2
(Figure: Income and Leisure Opportunities) The figure Income and Leisure
Opportunities refers to Keisha when she has 100 hours per week for working or
leisure. There are two time allocation lines, one when she earns $10 per hour
working, and one when she earns $20 per hour working. As the amount she earns
increases from $10 per hour to $20 per hour, Keisha will work ________ hours
because of the substitution effect.
25. Multiple Choice: Figure: Income and Leisure Opportunit...
Question
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Figure: Income and Leisure Opportunities
Reference: Ref 19-2
(Figure: Income and Leisure Opportunities) The figure Income and Leisure
Opportunities refers to Keisha when she has 100 hours per week for working or
leisure. There are two time allocation lines, one when she earns $10 per hour
working, and one when she earns $20 per hour working. As the amount she earns
increases from $10 per hour to $20 per hour, Keisha will work ________ hours
because of the income effect.
26. Multiple Choice: Figure: Income and Leisure Opportunit...
Question
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Figure: Income and Leisure Opportunities
Reference: Ref 19-2
(Figure: Income and Leisure Opportunities) Given Keisha‘s preferences and
opportunities for income and leisure shown in the figure Income and Leisure
Opportunities, Keisha sees leisure as:
27. Multiple Choice: Figure: Davina‘s Labor Supply Choice ...
Question
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Figure: Davina‘s Labor Supply Choice
Reference: Ref 19-3
(Figure: Davina‘s Labor Supply Choice) The figure Davina‘s Labor Supply Choice
shows Davina’s time allocation budget line when her hourly wage is $10 or $15 and
she has 80 hours to allocate between labor and leisure; it also shows two of her
indifference curves for income and leisure. When Davina earns $10 per hour, she
works ________ hours and enjoys ________ hours of leisure.
28. Multiple Choice: Figure: Davina‘s Labor Supply Choice ...
Question
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Figure: Davina‘s Labor Supply Choice
Reference: Ref 19-3
(Figure: Davina‘s Labor Supply Choice) The figure Davina‘s Labor Supply Choice
shows Davina’s time allocation budget line when her hourly wage is $10 or $15 and
she has 80 hours to allocate between labor and leisure; it also shows two of her
indifference curves for income and leisure. When Davina earns $15 per hour, she
works ________ hours and enjoys ________ hours of leisure.
29. Multiple Choice: Figure: Davina‘s Labor Supply Choice ...
Question
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