Which of the equilibrium points on the leisure-income graph below has a wage rate of $4 per hour?
A)a
B)b
C)c

Question

Which of the equilibrium points on the leisure-income graph below has a wage rate of $4 per hour? 
A)a 
B)b 
C)c

Quizplus · Accepted Answer

The equilibrium point at C corresponds to a wage rate of $4 per hour. This is where the marginal rate of substitution for leisure and income is equal to the wage rate, which in this case is $4. At point C, the individual is willing to trade off 4 units of income for each unit of leisure forgone, which is exactly equal to the wage rate they can earn by working. Therefore, point C is the best choice for someone who wants to earn a wage rate of $4 per hour.

Which of the Equilibrium Points on the Leisure-Income Graph Below