Suppose earnings are given by E = $50 + $20(24 − L),where E is earnings and L is the hours of leisure.What is the price to the worker of consuming an additional hour of leisure?
A) $30
B) $26
C) $24
D) $20

Question

Quizplus · Accepted Answer

The price to the worker of consuming an additional hour of leisure is the foregone earnings from not working that hour, which is equal to the marginal earnings from one hour of work, or the slope of the earnings function with respect to leisure. Taking the derivative of the earnings function with respect to leisure, we get:

dE/dL = -20

This means that for every additional hour of leisure taken, earnings decrease by $20. Therefore, the price to the worker of consuming an additional hour of leisure is $20. Choice D is the correct answer.

Suppose Earnings Are Given by E = $50 + $20(24