In the labour market, the optimal number of work hours is determined when:
A)the MRS of income for leisure is the wage.
B)the MRS of income for consumption is the wage.
C)the MRS of leisure for consumption is the wage.
D)total utility is maximized.

Question

Quizplus · Accepted Answer

The optimal number of work hours is determined when the MRS (Marginal Rate of Substitution) of income for leisure equals the wage. This means that individuals will choose to work until the additional income they earn by working one more hour is equal to the income they would have received by spending that hour on leisure. This is the point where they maximize their utility in terms of both income and leisure.

In the Labour Market, the Optimal Number of Work Hours