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Figure: Davina's Labour Supply Choice
-(Figure: Davina's Labour Supply Choice)The figure Davina's Labour 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 labour 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.
A) 20;60
B) 30;50
C) 40;40
D) 50;30

Question

Use the following to answer questions :
Figure: Davina's Labour Supply Choice 
-(Figure: Davina's Labour Supply Choice)The figure Davina's Labour 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 labour 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.
A) 20;60 
B) 30;50 
C) 40;40 
D) 50;30

Quizplus · Accepted Answer

When Davina earns $15 per hour, she works 40 hours and enjoys 40 hours of leisure. This is the point where her budget line is tangent to her highest attainable indifference curve, indicating that it is the optimal combination of income and leisure given her constraints. At all other points on the budget line, she could increase her utility by either working more or enjoying more leisure.

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