combination income (S)combination injury risk wage ()n wage (S)kan 6.5 12.5 18.5
ID: 1110849 • Letter: C
Question
combination income (S)combination injury risk wage ()n wage (S)kan 6.5 12.5 18.5 24.5 leisure Kathy 182 152 132 122 8.00 9.50 12.50 17.00 8.00 10.00 14.00 20.00 10 12 a. The first three columns of the table above show four combinations of leisure (measured in hours per day) and income that yield equal utility to a worker named Jon, who can allocate no more than 16 hours per day to labor and leisure. Demonstrate that Jon's preferences for leisure and income exhibit diminishing marginal utility. Explain your analysis b. Suppose Jon is offered an hourly wage of $22. Calculate the labor income Jon could earn engaging in 6, 8, 10, and 12 hours of leisure per day (as highlighted in the table) Show these calculations. Does combination A lie on Jon's budget constraint, to the left of his budget constraint, or to the right of his budget constraint? Explain. Answer this question for combinations B, C, and D as well, explaining your analysis throughout. c. The last four columns of the table show four combinations of injury risk (measured as annual accidents per 10,000 employees) for a certain job and an hourly wage rate that would yield equal utility for Jon and another worker, Kathy. Which of the two workers would more likely take a relatively dangerous job in equilibrium? ExplainExplanation / Answer
a)Using the different combination of leisure and income which lies on the indifference curve We can calculate the marginal utility which is the slope of the indifference curve. Looking at the MU we can say that MU is decreasing.
b)
c) Kathy is supposed to take more risky job as wage is an increasing function of Risk.
Combination leisure income MU A 6 182 B 8 152 -0.07 C 10 132 -0.10 D 12 122 -0.20Related Questions
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