Roxanne's hourly wage increases from $9 to $13. Which of the following describes a consequence of the increase in Roxanne's wage?
A)The opportunity cost of Roxanne's leisure time has increased.
B)Roxanne may choose to work fewer hours due to the increase in her wage.
C)If Roxanne's labor supply curve is upward sloping, she will choose to work fewer hours.
D)Both a and b are correct.

Question

Quizplus · Accepted Answer

Option A is correct because with the increase in Roxanne's hourly wage, the opportunity cost of her leisure time increases as she could potentially earn more by working instead of leisure.
Option B is also correct because Roxanne may choose to work fewer hours due to the increase in her wage because her increased earnings enable her to maintain her previous level of lifestyle while working fewer hours.
Option C is incorrect because the labor supply curve slopes upward, which means that as the wage rate increases, the quantity of labor supplied also increases. Therefore, Roxanne will choose to work more, not fewer hours.

Roxanne's Hourly Wage Increases from $9 to $13