Mr.Cog has 18 hours per day to divide between labor and leisure.If he has a nonlabor income of 48 dollars per day and a wage rate of 15 dollars per hour, he will choose a combination of labor and leisure that allows him to spend
A)318 dollars per day on consumption.
B)149 dollars per day on consumption.
C)159 dollars per day on consumption.
D)183 dollars per day on consumption.
E)238.50 dollars per day on consumption.

Question

Mr.Cog  has 18 hours per day to divide between labor and leisure.If he has a nonlabor income of 48 dollars per day and a wage rate of 15 dollars per hour, he will choose a combination of labor and leisure that allows him to spend
A)318 dollars per day on consumption.
B)149 dollars per day on consumption.
C)159 dollars per day on consumption.
D)183 dollars per day on consumption.
E)238.50 dollars per day on consumption.

Quizplus · Accepted Answer

Mr. Cog's total income is the sum of his nonlabor income and his labor income. If he works all 18 hours, his labor income is 18 hours * $15/hour = $270. Adding his nonlabor income of $48, his total income is $318. However, he will choose a combination of labor and leisure that maximizes his utility, not necessarily working all 18 hours. The correct choice is the one that reflects a reasonable balance, which is $159, assuming he works 7.4 hours (7.4 * $15 + $48 = $159).

MrCog Has 18 Hours Per Day to Divide Between