If the wages of a CPA decrease,
(i)her opportunity cost of leisure increases.
(ii)her opportunity cost of leisure decreases.
(iii)her hours of labor supply may increase.
(iv)her hours of labor supply may decrease.
A)(i) and (iii) only
B)(ii) and (iv) only
C)(i), (iii), and (iv) only
D)(ii), (iii), and (iv) only

Question

Quizplus · Accepted Answer

When wages decrease, the opportunity cost of leisure decreases because the foregone earnings from not working are lower. This may lead to an increase in labor supply if the CPA works more to maintain income, or a decrease if the CPA values leisure more with lower wages.

If the Wages of a CPA Decrease